Alaska Communications Systems Holdings, Inc., as Borrower, Alaska Communications Systems Group, Inc., as Parent and subsidiaries of Alaska Communications, as guarantors, and ING Capital LLC, as administrative agent, entered into a new senior credit facility, which provides for term loans including a $120 million tranche maturing in 2022 with an interest rate of LIBOR plus 5% and a $60 million tranche maturing in 2023 with an interest rate of LIBOR plus 7%, in addition to a $15 million revolving credit facility with an interest rate of LIBOR plus 5%.

Upon the satisfaction of certain standard conditions, on or before March 28, 2017, the 2017 Senior Credit Facility will be funded and Alaska Communications will use the proceeds to repay in full the outstanding borrowings under its 2015 Senior Credit Facilities totaling approximately $87 million, set aside an amount equal to the $94 million outstanding principal balance of its 6.25% Convertible Notes due May 1, 2018 and to pay fees and expenses related to the transaction. Alaska Communications expects to launch a tender offer to repurchase the convertible notes.

Principal payments on the new debt will be due quarterly commencing December 31, 2017. The larger tranche begins amortization at the rate of 1.25% per quarter for approximately two years and stepping up thereafter, while the second tranche begins amortization at the rate of 0.25% per quarter for approximately three years and stepping up thereafter. The facility will be subject to customary covenants, including two key financial covenant ratios. The first is a net leverage coverage ratio not to exceed 3.75 to 1, stepping down over time, as provided in the facility. The second is a fixed charge coverage ratio of not less than 1.05 to 1, as provided in the facility. The facility also includes a $10 million starter basket to repurchase the Parent’s outstanding stock, subject to, among other things, certain excess free cash flow and liquidity requirements. Purchases in excess of $10 million may also be allowed under the facility if, among other things, an additional net leverage test is met. The facility also provides for incremental loans up to an additional $50 million, subject to obtaining applicable lender commitments.

“We are pleased to announce we have closed an agreement extending our senior debt maturities to 2022 and 2023, and, subject to certain limitations, providing for the repurchase of the convertible notes. The cost of borrowing under the 2017 Senior Credit Facility is similar to that of our 2015 Senior Credit Facilities, which was scheduled to mature next year. We look forward to working with this group of lenders who can support our business over the long term,” Alaska Communications SVP of Finance Laurie Butcher said.