Cogent Communications (AMEX:COI), one of the four largest optical broadband services providers for office buildings in the US, filed a prospectus for a Nasdaq issue with the Securities and Exchange Commission (SEC) last week. CIBC (NYSE:BCM; TSX:CM), Jeffries & Co. (NYSE:JEF), and Friedman, Billings, Ramsey Group are the underwriters.
Cogent was listed on AMEX in 2002, when it acquired Allied Riser, which was already listed on that exchange, for $25 million. The public's holding in the company is limited. Sources inform “Globes” that the Cogent mainly uses its AMEX listing for administrative, rather than financial, purposes. Sources close to the company say that if the Nasdaq issue is successful, it will create an actively traded share.
$17 million to repay debts
Cogent wants to raise $75 million at a company value of $250-300 million. According to the prospectus, $17 million from the proceeds will be paid to Cisco Systems (Nasdaq:CSCO) to cover a $20 million debt. The rest of the proceeds will be used to expand the company's sales and marketing network, and to acquire companies to complete Cogent's needs. Cogent has raised $580 million to date, including a $300 million credit line from Cisco.
Cogent's shareholders include Cisco (20%), Jerusalem Venture Partners, and US funds Oak Investment Partners, Broadview Capital Partners, Boulder Ventures, and Nassau Capital.
A year ago, Cisco wrote off $262 million from the $311 million credit line it granted Cogent in 2000. Cisco's demand that Cogent repay the debt almost forced the company into bankruptcy.
After almost six months of negotiations, an arrangement was reached for Cogent's continued operation. Cisco wrote off most of the debt in exchange for an 18% stake in the company, $20 million in cash, and $17 million in bonds to be redeemed beginning in 2006. Cogent's total debt was slashed from $380 million to $27 million.
Simultaneously with the arrangement, JVP organized a $41 million financing round with the participation of Cogent's existing shareholders. JVP, which has accompanied Cogent since it was founded in 1998 and has invested $25 million in the company, owns a 19.2% stake. If the Nasdaq issue goes ahead as planned, JVP will own shares worth $50 million and could earn a $30 million capital gain. JVP can sell its Cogent shares after a six-month restriction period.
JVP declined to comment about the Cogent issue or future profits. Cogent was the first non-Israeli company that JVP invested in. After its first financing round, Cogent bought technology from Chromatis Networks.
One gigabyte per second
Cogent provides low-cost broadband services, mostly for office buildings. The company provides broadband services to 900 buildings, including 760 of the largest office buildings in the US. Cogent recently expanded its business to Europe by acquiring a financially troubled company.
Published by Globes [online] - www.globes.co.il - on May 24, 2004