Maxcom Telecommunications Inc. (NYSE: MXT) is considering filing for bankruptcy protection, among other restructuring options, after a takeover deal with Mexican private equity firm Ventura Capital Privado SA de CV fell apart in April.
Maxcom provides phone, Internet and cable services to residential customers, as well as small and medium-sized businesses across Mexico, namely Mexico City, Puebla, Queretaro and Toluca.
The company is currently working on a restructuring plan, according to a May 1 filing with the U.S. Securities and Exchange Commission. That planning process could lead it to decide it can't continue without the threat of liquidation.
Mexico City-based Ventura made its $2.90 per share offer for Maxcom in December. For the deal to go through, 80 percent of the noteholders would have had to agree to the takeover.
The company planned to exchange its outstanding 11 percent senior notes due 2014 for step-up senior notes due 2020 in an April 24 tender offer, but only 62 percent of the old notes were validly tendered. The tendered notes were returned to the noteholders after the offer failed.
On Dec. 4, 2012, Maxcom entered into a recapitalization agreement. Under the agreement, Maxcom would exchange its senior secured notes, and Ventura Capital Privado SA de CV would conduct a tender offer for the company's outstanding equity securities and make a $45 million capital contribution to the company. The tender offer and capital contribution were conditioned upon the success of the debt exchange offer, which was extended three times and expired on April 24, so Maxcom did not receive the capital contribution.
In a May 1 filing with the U.S. Securities and Exchange Commission, Maxcom says that because of the failure of the debt exchange offer and subsequent capital contribution, the company is considering filing for Chapter 11 bankruptcy protection in the U.S., or going through a different restructuring proceeding.
The situation has caused Maxcom to delay issuing its consolidated financial statements for the year ended Dec. 31, the company says in SEC filings.
In the company's latest annual report, filed April 25, 2012, it said that it had $201 million in debt as of Dec. 31, 2011, which was mainly from the notes due 2014.
Maxcom also says in the 2012 filing that the Mexican telecommunications industry is increasingly competitive, which could cause prices for the services to go down, resulting in losses. Its competitors, which include Telmex, a large Mexican telecommunications company, have more employees, as well as more financial, technical and marketing resources, than Maxcom, the company says in the filing.
The company did not respond to a request for comment.