20160125Decision Memo.pdf

DECISION MEMORANDUM
TO:COMMISSIONER KJELLANDER
COMMISSIONER RAPER
COMMISSIONER ANDERSON
COMMISSION SECRETARY
LEGAL
WORKING FILE
FROM:TERIU CARLOCK
DATE:JANUARY 22,2016
RE:COLUMBINE TELEPHONE COMPANY’S REQUEST TO ENTER INTO
LOAN AGREEMENT,LINE OF CREDIT AGREEMENT AND
GUARANTEES;CASE NO.COL-T-15-02.
On December 28,2015,Columbine Telephone Company,Inc.(Columbine),filed an
Application for authority to execute:1)a Loan Agreement in an amount not to exceed
$1,333,334 (“A Loan”);2)a line of credit agreement in an amount not to exceed $2,000,000 (“B
Loan”)and an unsecured guaranty of payment (the “Guaranty”)in favor of the Rural Telephone
Finance Cooperative (“RTFC)guaranteeing payment of a term loan from RTFC to Columbine’s
parent company Horizon Communications,Inc.(“Horizon”)in the amount of 54,444.444 and a
revolving line of credit in the amount of $3,888,889 (collectively the “Horizon Loans”).
In support of said Application,Columbine aLleges that the proceeds of the RTFC loans to
Columbine from the A Loan in the amount ofSl,200,000 will finance the buildout of
Columbine’s incumbent local exchange carrier (ILEC)infrastructure,including a redundant fiber
ring,in Rexburg,ID,and $133,334 will fund the purchase often percent RTFC Subordinated
Capital Certificates.The line of credit for $2,000,000 will be used to provide short-term working
capital for general corporate purposes.Columbine further alleges that the Horizon Loans
Guaranty is a condition of the Horizon Loans by RTFC,and that guarantees by each of
Columbine’s sister companies also would be required.
LOAN TERMS
The Columbine A Loan is an eight-year secured term loan in the amount of $1,333,334.
At the time of issuance,Columbine may elect a fixed or variable interest rate.Current rates
range from 3.5%to 5.5%.Columbine must meet financial covenant requirements with a
DECISION MEMORANDUM 1 JANUARY 22,2016
minimum Debt Service Coverage (“DSC”)Ratio and a maximum Leverage Ratio.Other
covenant requirements are placed on dividend distributions,other cash distributions,corporate
control,new subsidiaries,organizational changes and additiona’indebtedness.
The Columbine B Loan is a two-year secured revolving line of credit in the amount of
$2,000,000.The line of credit balance must be paid off for a minimum period of five days every
360 days.
LOAN GUARANTY
The Horizon Loan from RTFC to the Columbines parent company,Horizon
Communications,Inc.(1-lorizon’),in the amount $4,444,444 is to refinance the total outstanding
balances on Horizons subsidiaries lines of credit from RTFC and the purchase often percent
RTFC Subordinated Capital Certilicates.This loan is an eight-year secured,fully amortizing
term loan.A second loan in the amount of $3,888,889 is to finance Horizons budgeted capital
expenditures.It is also an eight-year secured,fully amortizing term loan.
Horizon Communications,Inc.,a corporation organized under the laws of the State of
Wyoming,with the following wholly-owned subsidiaries:Teton Communications,Inc.
(“Teton”);Silver Star Telephone Company,Inc.(“Silver Star”);Columbine Telephone
Company,Inc.(“Columbine”);Mountainland Communications.LLC (“Mountainland”);
Goldstar Communications.LLC (“Goldstar”);World Visions Group,LLC (“WVG”)(hereafter
collectively referred to as the “Subsidiaries”).
Unsecured guarantees for the full amount of the l-Iorizon Loans plus interest and fees will
be pledged from Silver Star and Columbine.Secured guarantees for the full amount of the
Horizon Loans plus interest and fees will be required from Subsidiaries,Millennium and Gold
Star.
STAFF RECOMMENDATION
Staff recommends the Commission grant the requested Columbine debt authority for the
eight-year secured loan for $1,333,334 and two-year secured revolving line of credit for
$2,000,000.
Staff recommends the Commission authorize Columbine to guaranty the Horizon Loan as
unsecured guarantees for $4,444,444 and $3,888,889.
Staff recommends Columbine file copies of all agreement terms and final documents.
DECISION MEMORANDUM 2 JANUARY 22,2016
approve the Columbine eight-year secured loan?
approve the two-year secured revolving line of credit?
approve the unsecured guaranty of the Horizon Loans?
wish to require copies of all agreement terms and final documents
Secretary?
Tern Carlock
COMMISSION DECISION
Does the Commission
Does the Commission
Does the Commission
Does the Commission
be filed with the Commission
TC\coItI5.02 debt and guarantee DM I 2016
DECISION MEMORANDUM 3 JANUARY 22,2016