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Business Services Industry

PRIMUS Telecommunications Raises $42 Million in Convertible Preferred Stock Financing

Business Wire, Dec 31, 2002

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MCLEAN, Va.--(BUSINESS WIRE)--Dec. 31, 2002

PRIMUS Telecommunications Group, Incorporated ("PRIMUS" or the "Company") (Nasdaq: PRTL), a global facilities-based Total Service Provider offering an integrated portfolio of voice, data, Internet and web hosting services, today announced it has signed an agreement to sell newly-issued shares of its Series C Convertible Preferred Stock (the "Series C Preferred") for an aggregate purchase price of $42 million in a private offering to two private equity funds sponsored by the American International Group, Inc. (collectively, "AIG") and an additional institutional investor that is a limited partner of one of the funds.

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The new Series C Preferred will be convertible into shares of the Company's Common Stock at a conversion price of $1.876 per share, subject to certain adjustments, which today represents approximately a 25.2% fully-diluted ownership interest in PRIMUS.

The first phase of the transaction closed today with PRIMUS receiving approximately $33 million from AIG and the additional investor, with AIG obtaining a 19.99% ownership interest in PRIMUS' issued and outstanding capital stock. It is expected that the balance of the transaction will close upon the earlier to occur of either approval by PRIMUS' shareholders for AIG to own in excess of 19.99% of PRIMUS' issued and outstanding capital stock, or subsequent issuances of PRIMUS capital stock to third parties which would bring AIG's ownership of the Series C Preferred (including the remaining Series C Preferred) below the 20% threshold.

PRIMUS intends to use the proceeds from the financing for general corporate purposes, including working capital, debt reduction and potential acquisitions involving industry consolidation opportunities. As part of this transaction, PRIMUS has the right to issue up to $75 million of additional principal amount of Convertible Preferred Stock on similar terms through June 1, 2004, and, if such issuances are contractually committed within the next 45 days, such additional Convertible Preferred Stock can be issued on the same terms, including pricing, as those offered to AIG, subject only to obtaining requisite shareholder approval. The proceeds from any such additional issuances of Convertible Preferred Stock would be used for similar purposes.

"The investment announced today marks a significant milestone in PRIMUS' execution of the three-pronged strategy we announced two years ago," stated K. Paul Singh, Chairman and Chief Executive Officer of PRIMUS. "In late 2000, as we surveyed a bleak economic landscape and uncertain future for the telecommunications sector, we resolved to become an industry survivor through implementing a bold strategy to dramatically reduce our debt, aggressively grow our EBITDA (earnings before interest, taxes, depreciation and amortization) and, when substantial progress was made on both those fronts, to access additional capital. Since that time, we have reduced our debt by over 50% and we have grown our EBITDA from slightly positive to a projected level approaching $100 million for 2002. With today's announcement, we can record substantial progress on the third prong of our strategy."

"The AIG investment, which brings to PRIMUS a sophisticated and resourceful partner, is a tangible validation of the progress we have made and their belief in our future potential. The transaction improves our liquidity, strengthens our balance sheet, provides resources to permit us to resume a growth strategy, and also sets the platform for potential future equity investments in PRIMUS," Mr. Singh commented. "As a consequence, we are now able to address 2003 with enhanced vitality and a refreshed commitment to growth. We believe that, given the turmoil that exists in the telecommunications sector generally, consolidation opportunities are becoming increasingly available at attractive valuations and terms. Clearly, now is the time to accumulate cash resources to enable us to seize opportunities as a potential consolidator to build greater long term value for our shareholders. The new funding and the flexibility to raise additional Convertible Preferred equity position us to target accretive acquisition opportunities."

The Series C Preferred has an initial conversion price of $1.876 per share, subject from time-to-time to weighted-average antidilution adjustments, provided that such adjustments do not result in an adjusted conversion price of less than $1.754 per share. The Series C Preferred will be subject to mandatory conversion when the Company's Common Stock trades for a defined period above three times the then applicable conversion price. The Series C Preferred will be subject to certain performance adjustments, payable as an adjustment to the conversion price or in cash at the Company's option, which feature will be extinguished upon the Company's attaining any one of certain specified performance targets (including a reduction in total net debt to $405 million or less, an average daily closing price for the Company's Common Stock during any thirty day period that equals or exceeds the then applicable conversion price, or reduction to a level of 3.625 or less in the Company's net debt/EBITDA ratio). Each share of Series C Preferred is entitled to a liquidation preference payment ahead of the Company's Common Stock equal to the then applicable conversion price multiplied by the number of shares of Common Stock into which such share is convertible plus an amount representing a 15% internal rate of return (less dividends and distributions previously made). So long as holders of the Series C Preferred maintain certain minimum ownership percentage interests in PRIMUS, they will be entitled to nominate one member (at greater than 5% levels) and one observer (at greater than 10% levels) to PRIMUS' Board of Directors.

Business Services Industry

PRIMUS Telecommunications Raises $42 Million in Convertible Preferred Stock Financing

Business Wire, Dec 31, 2002

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