Maxcom Telecommunications SAB de CV (NYSE: MXT) plans to file for Chapter 11 to implement a recapitalization and restructuring agreement, which would result in private equity ownership.

Mexico City-based Maxcom provides phone, Internet and cable services to residential and small-business customers across Mexico. The company has been struggling with increased competition, and was placed on Mergers & Acquisitions’ Distressed Company Watch List on May 14. 

Private equity firm Ventura Capital Privado SA de CV and related parties have agreed to make a capital contribution of $45 million and conduct a tender offer to buy up to 100 percent of Maxcom’s shares for about $0.22 per share.

Maxcom, Ventura and a group of supporting noteholders that hold about $84 million of $200 million of Maxcom’s 11 percent Senior Notes due 2014, and certain equity holders, have reached the agreement, the company said in a July 3 statement.

The deal is subject to regulatory approval from the Mexican Banking and Securities Commission, the Mexican Ministry of Communications and Transportation and the Mexican Antitrust Commission. The deal also requires approval from the bankruptcy court. As of midday July 5, Maxcom had not yet filed for bankruptcy.

Under the terms of Maxcom’s plan, all creditors would be paid in full except for the 11 percent senior notes claims, which would receive notes that would mature in 2020.

Maxcom said in April that it would consider filing for bankruptcy after a takeover deal with Ventura collapsed.

Mexico City-based Ventura made the original offer for Maxcom in December for about $0.22 per share. For the deal to go through, 80 percent of the noteholders would have needed to approve the takeover. 

The company’s shares closed at $1.92 on Dec. 3, before Ventura’s initial offer, and opened at $2.32 on July 5.

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 lack of the subsequent capital contribution, the company would consider filing for Chapter 11 bankruptcy protection in the U.S., or going through a different restructuring proceeding.

Lazard Freres & Co. LLC and Alfaro Davila y Rios SC are Maxcom’s financial advisers. Kirkland & Ellis LLP and Santamarina y Steta SC are providing legal advice.

The group of supporting noteholders has hired Steen & Hamilton LLP and Cleary Gottlieb Cervantes Sainz SC as its legal advisers. 

Vace Partners is acting as Ventura’s financial adviser, and Paul Hasting LLP and Jones Day are providing legal advice.

For more on Maxcom, see “Mexican Telco Considers Ch. 11 After PE Deal Fizzles.”

For more on distressed companies, see Mergers & Acquisitions’ Distressed Company Watch List. 

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