Cogent Communications has plenty of cash for note repayment, says CEO

By Lisa Kerner

Charlotte, N.C., Dec. 3 - Cogent Communications Group, Inc. has no incentive to take out its $92 million of 1% convertible notes early, according to chief executive officer Dave Schaeffer.

The notes will likely be put to or called by Cogent in June.

Schaeffer made his comments Tuesday during a presentation at the Bank of America Merrill Lynch 2013 Leveraged Finance Conference in Boca Raton, Fla.

With about $310 million of cash on the balance sheet, Cogent could "clearly refinance or take out the convertible" and still return cash, Schaeffer said.

Cognizant of the interest rate environment and the need to return capital to equity holders, Schaeffer said "we are thinking about putting an additional tranche of capital in place."

"Now we may do that as a stand-alone instrument, either a revolver, a term loan bid, an unsecured note - all are all possibilities," said Schaeffer, noting that no decisions have been made.

Asked about recasting all the debt, Schaffer said Cogent will be evaluating the market over the next six months and will "probably" recast debt.

Cogent is targeting a net leverage goal of 0.5 times, from its current 1.6 times.

Schaeffer also addressed a question about M&A, saying that while the cost of capital keeps coming down, the price expectations of many sellers, relative to their businesses' cash flows, are "unrealistic."

"One thing we learned in the acquisitions we did, you must treat debt as temporary capital, not permanent capital, because if you fall into the trap of always expecting to be able to refinance your way out of your situation, you'll end up like the targets we ended up acquiring," said Schaeffer.

Cogent is a Washington, D.C.-based communications services provider.

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