Telephone and Data Systems, Inc. (NYSE: "TDS") has recently finalized a significant financial deal, as reported on May 3, 2024. The company announced the successful closure of a $375 million unsecured debt financing with Oaktree Capital Management, L.P., a leading global investment manager.
The funds procured through this financing are earmarked for general corporate purposes, with a specific focus on advancing TDS Telecom's fiber build program. Vicki L. Villacrez, TDS Executive Vice President and CFO, emphasized the company's commitment to expanding fiber services, stating, "Now that all of our fiber expansion communities have been initially launched, TDS Telecom is continuing to make progress towards its long-term goal of 1.2 million marketable fiber service addresses."
Milwood Hobbs, Jr., Head of Sourcing & Origination at Oaktree, expressed Oaktree's enthusiasm for the partnership with TDS, highlighting the importance of the capital infusion in supporting TDS's crucial fiber network investments. Hobbs stated, "Oaktree is excited to partner with TDS to support its critical fiber network investments. This capital will help enable TDS to provide reliable high-speed broadband capacity to new and often underserved areas. We believe this infrastructure is vital to all communities."
The financing structure allows TDS the flexibility of a 5-year loan, with the option for early repayment under certain conditions. The initial borrowing amount of $300 million, minus the original issue discount, has already been secured, while the remaining $75 million remains accessible for the next 18 months, subject to specific conditions. The interest on the borrowings is set at a floating rate of SOFR +7%.
Wells Fargo and Citi played pivotal roles as financial advisors to TDS during this transaction. The borrowing has caused a slight increase in TDS' weighted average cost of debt and preferred equity, now standing at approximately 6.8%, though it remains attractive in the current high-interest rate environment.
Telephone and Data Systems, Inc. is a Fortune 1000® company offering wireless, broadband, video, voice, and hosted services to approximately 6 million connections nationwide through its various subsidiaries. Oaktree, with $192 billion in assets under management, specializes in alternative investments and is known for its value-oriented approach across different investment sectors.
This collaboration between TDS and Oaktree signifies a strategic move towards bolstering TDS's fiber network infrastructure, ultimately aiming to enhance broadband connectivity in communities across the United States.