ECI clears $100m debt

The cleaning up of the balance sheet could be a step toward the sale of the company.

The details about ECI Telecom Ltd's balance sheet have been unknown since the company went private, but it was clear that the company carried a hefty debt, amounting to hundreds of millions of dollars, as a result of its acquisition by Shaul Shani's Swarth Group and Ashmore Investment Management Ltd. (LSE: ASHM) for $1.24 billion.

The acquisition, in late 2007, was financed by credit and shareholders' equity. Today, ECI announced that it and its shareholders have acquired all the remaining debt extended to it for the acquisition, thereby significantly improving its capital structure.

The deal, however, will reduce the company's cash.

The timing of the measure may be intended to clear the company's balance sheet ahead of more extensive strategic moves, such as a sale, acquisition, or offering. ECI apparently received good enough terms from its debt holders to facilitate the decision.

A window into ECI's capital structure opened in July 2008, when it announced that it had successfully reduced its debt to Credit Suisse Group AG (NYSE: CS; SWX: CSGN; XETRA: CSGZ), which financed the deal, from $200 million to $140 million, following a repricing with the bank.

Over time, ECI carried out other financial measures to improve its balance sheet. Then, as now, the company's announcements were quite vague, and it did not disclose who bought the debt, how much was bought, which shareholders participated, and what its balance sheet total is. The balance of the debt, which has now been cleared, was estimated at $100 million.

Published by Globes [online], Israel business news - - on December 6, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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