Net Serviços plans exchange for 12 5/8% notes

New York, Nov. 8 - Net Serviços de Comunicação SA said it is planning an exchange in which it will offer up to $76.593 million of 7% senior secured notes due 2009 and cash for its existing $97.692 million of 12 5/8% senior guaranteed notes due 2004.

The Sao Paolo, Brazil-based pay television operator is also soliciting consents to amend the indenture of the 12 5/8% notes.

For each $1,000 principal amount of the existing notes, Net Serviços is offering $784.03 principal amount of new notes and $522.68 of cash plus additional cash equal to accrued interest on $1,306.71 from July 1, 2004 through the day immediately before the closing of the exchange at a rate of Libor plus 300 basis points.

The exchange is part of a restructuring of the company's debt. Net Serviços stopped making payments on its debt in December 2002.

The new notes will, with some conditions, be secured by the pledge of Net Serviços' shares of some of its subsidiaries, all its network assets and its accounts receivable from subscribers in São Paulo, Santos and Rio de Janeiro.

For the amendments in the consent solicitation to become effective, holders of at least a majority of the existing notes must consent.

The proposed changes would eliminate substantially all the covenants in the note indenture except those requiring payment of principal and interest, requiring the provision of annual reports and limiting asset sales, among other things.

Cash for the restructuring will come from an offering of 745 million common shares and 1.080 billion preferred shares in a private offering at a price of R$0.35 per share. Globopar will buy all the common shares except those taken by existing shareholders and Telmex will buy the preferred shares to which Globopar is entitled.

No timing was given in the S-4 document filed with the Securities and Exchange Commission.

Credit Suisse First Boston LLC is dealer manager and exchange offer.

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