Monday, March 2, 2009

Zayo Raises $128 Million in New Funding, More Acquisitions Coming?

Zayo Group, a regional provider of fiber based bandwidth, telecom and wholesale voice solutions, announced today that Morgan Stanley Alternative Investment Partners (Morgan Stanley AIP) has joined in a second closing to complete its recently announced Series B round of equity financing. In total, $128 million of new equity was associated with the first and second closings.

The first closing for the round of equity financing was announced on February 12th. Charlesbank Capital Partners led the Series B round and, as part of the first closing, all of Zayo's existing equity investors increased their investment in Zayo. Zayo's equity syndicate now consists of Battery Ventures, Centennial Ventures, Charlesbank Capital Partners, Columbia Capital, M/C Venture Partners, Morgan Stanley AIP, and Oak Investment Partners.

Zayo, which is based in Louisville, Colorado, operates a fiber network that spans 129 markets in 23 states. The company is organized into three business units: Zayo Bandwidth, Zayo Managed Services and Onvoy Voice Services.

Since May of 2007, Zayo has completed acquisitions of eleven businesses including NTI, Citynet Fiber Network, Memphis Networx, PPL Telcom, Indiana Fiber Works, Onvoy, VoicePipe, Columbia Fiber Solutions and 5 CenturyTel CLEC markets. Zayo also recently acquired network assets from the Adesta Secured Creditor Trust and additional assets from Citynet.

Zayo noted that its revenue is now approximately $200M and its EBITDA is approximately $60M. The company said it is net income positive and, beginning in 2Q09, is expected to be free cash flow positive. Prior to the Series B round, Series A equity was $186M. The Series B round consisted of an additional Series A investment of $33M, bringing the total amount of the Series A facility to $219M. The size of the Series B facility is $95M. This capital will be drawn into Zayo only as needed. Zayo has $137M of bank debt and drawn revolver. With a cash balance of approximately $37M, Zayo's net debt is approximately $100M.