Maxcom Completes Exchange Offer for Series B Senior Notes and U.S. $66.2 Million Private Equity Capitalisation

The Mexican competitive local exchange carrier Maxcom Telecomunicaciones, SA de CV, has successfully completed an exchange offer for its 13-3/4 per cent Series B Senior Notes due 2007 and a US$66.2 million private equity investment. The transaction closed on Monday April 29.

Holders tendered 94.3 percent of outstanding Series B Senior Notes, worth US$259 million, and received New Senior Notes worth a aggregate amount of US$165 million. The new notes bear 0 percent interest through March 1 2006 and 10 percent annual interest in the last year. Tendering holders also received an aggregate amount of 26.5 million ordinary participation certificates (CPOs).

Following consummation of the offer, certain shareholders headed by Nexus-Banc of America Fund II as well as other investors including BAS Capital Funding Corporation, committed to invest an additional US$66.2 million in Maxcom in exchange for up to 77 percent of its total capital stock.

The exchange offer was carried out pursuant to a 3(a)(9) exemption from registration under the Securities Act of 1933, while the US$66.2-million private placement was made pursuant to a 4(2) exemption from registration under the same act.

Maxcom started with the aim of converting US$275 million worth of 13.75 percent Series B Senior Notes due 2007 into New Senior Notes worth US$175 million and 28,050,000 CPOs. Series B Senior Notes worth US$15.6 million remain outstanding.

Maxcom, headquartered in Mexico City, is a facilities-based telecommunications provider using a "smart-build" approach to deliver last-mile connectivity to small- and medium-sized businesses and residential customers in Mexico. Maxcom launched commercial operations in May 1999 and is currently offering local, long-distance and data services in Mexico City and the city of Puebla.

"This transaction will definitely be among the most important telephone deals in Mexico in 2002," said name partner Enrique González Calvillo of Gonzalez Calvillo, SC, Mexican counsel to Nexus-Banc of America Fund II, LP and BAS Capital Funding Corporation.

Maxcom was represented locally by general counsel Gonzalo Alarcón I, a partner at the law firm Alarcón Abogados, SC. Proskauer Rose LLP (New York) acted as US counsel to Maxcom in both the exchange offer and the private placement. The Proskauer Rose team included partners Carlos E. Martínez (Latin American practice head), Michael E. Foreman (bankruptcy and reorganisations), Richard H. Rowe (securities), Allan R. Williams (securities), Janet Korins (tax), Solomon Warhaftig (tax) and Neil Belloff (securities senior counsel), as well as associates Oliverio Lew, Robert Ivanschitz, Carla Passos and Lia Pistilli (all corporate) and tax associate Amanda Nussbaum.

Nexus-Banc of America Fund II, LP and BAS Capital Funding Corporation were represented by partners Margaret Gibson and Dennis M. Myers and associates Michael D. Belsley and Michael T. Wolf of Kirkland & Ellis, Chicago and by partner Jorge Cervantes and associates Alfredo Chavez and Juan Carlos Maroto of Gonzalez Calvillo, SC.

The bondholders were represented by partners Michael Stamer and Steve Scheinman and associate Jonathan Cole of Akin Gump Strauss Hauer & Feld LLP and by partner Carlos R. Valencia Barrera and Rodrigo Sánchez-Mejorada V of Sánchez Mejorada, Velasco y Valencia.

This article is reprinted with permission from the May 2002 issue of Latin Lawyer Magazine.