Vonage renegotiating debt terms

Vonage has told the SEC it is negotiating to change the terms of a $253 million debt payable in December, to avert having to repay bondholders. The company last month said repayment of the debt would threaten its on going viability.

In the filing this week, the VoIP provider said it "has explored the possibility of a transaction in which holders would agree to forego the right to "put" the convertible notes in December 2008." To induce the bond holders not to  crystallize the debt, Vonage said it was considering an increase in the interest rate payable under the convertible notes, a modification of the conversion price of the convertible notes or a change in maturity date of the convertible notes. Vonage said it may also agree to redeem a portion of the outstanding principal of the convertible notes with cash and/or issue equity or equity-type securities to participating holders.

Vonage interim CEO Jeffrey Citron last month told analysts the resolution of the $253 million debt was the company's major priority. Vonage's growth has largely stalled as it wound down marketing and customer acquisition costs in an effort to stop burning cash. Its major cash outflow has been replacing the large number of customers who churned out of the VoIP service. Vonage has a 3 percent monthly churn rate.

For Q4 2007, Vonage reported  it had gone cash positive on its operations for the first time. It has had to pay out $240 million in patent claims to other carriers. If it can't resolve its debt, Vonage is likely to be bought by another U.S. operator.

For more:
- Vonage SEC filing on its convertible notes Filing [1]
- Vonage may change debt payout Article [2]

Related articles:
Vonage goes cash positive--churn and debt still problems Article
[3]We are here forever, says Vonage chief Article [4]