Primus Telecommunications Group Inc. announced yesterday that it bought back $64.2 million of its long-term debt, reducing its debt to less than half the level of two years ago.
The McLean-based firm, which sells voice, Internet and data services worldwide, spent $46.9 million in cash to buy back the debt, which consisted of $43.65 million in notes with an 11.75 percent interest rate, due in 2004; $18.8 million in notes with a 9.88 percent interest rate, due in 2008; and $1.7 million in notes with an 11.25 percent interest rate, due in 2009.
Primus has roughly $549 million in debt remaining, far less than the $1.3 billion it had at the end of 2000. The buyback will save the company $19.3 million in future interest payments. The company reported that it had $79 million in cash at the end of September.
"This was a very strategic move for them," said Chris Roberts, director of research at investment firm Tejas Securities Group Inc. "It was particularly strategic because they are buying back the 2004 debt," which would have drained the company's cash supply next year, he said.
John F. DePodesta, an executive vice president at Primus, said, "This dramatically strengthens our balance sheet, and it has turned what a lot of investors had thought would be a hill in August of 2004 [when some of the debt was due] into a speed bump," because the company will have to pay only half of what was originally expected. "We continue to want to reduce debt."
Primus, founded in 1994, had about $1 billion in revenue last year. It has been buying back its debt for the past two years. Last month it raised $42 million from the sale of convertible preferred shares to American International Group Inc. and an unnamed institutional investor.