With venture capital investors becoming increasingly cautious in the face of their faltering public portfolios, private companies looking for bucket-loads of cash have recently found themselves balancing equity infusions with a significant influx of private debt. Joining this bifurcated list last week was Conversent Communications, which held a final close on its $186 million Series B deal.
Cable television entrepreneur-turned-angel-investor Robert Fanche led the deal?s $81 million private equity portion.
Fanche is not only the former chief executive of Franche Communications, which was sold last year to industry heavyweight Charter Communications, but he also once ran Citation Cable Systems and was a co-founder of Conversent Communications itself. In the company?s Series A deal, Fanche carved himself out a $23.5 million equity stake. He currently sits on the company?s board of directors alongside company Chief Executive Robert Shanahan.
The $105 million senior secured debt tranche was financed by the Bank of New York, CIT Lending Services, FleetBoston Financial, GE Capital Corp. and IBM Credit Corp., Both FleetBoston and CIT are existing investors in the company. Together, they committed $56 million in last fall?s Series A debt offering.
Although this is the first private financing of a competitive local exchange carrier (CLEC) in 2001, venture investors poured $2.39 billion into the sector last year, funding 16 different companies, according to our VentureXpert database.
Like other CLECs seeking private financing, Conversent Communications sought a one-to-one ratio of debt to equity on its balance sheet in order to fund the rapid deployment of the company?s communications network and avoid the cash-flow pressure of a heavy debt burden. After two years in business, the Marlboro, Mass.-based provider of bundled voice and data services has signed on 12,000 customers, mostly small businesses in the education, health care, insurance and financial services sectors.
This most recent round of funding is projected to fully fund the company?s business plan, said a company official. It does not plan on dipping back into the private equity markets before reaching the cash flow positive mark in the fall of 2002.
Carolina Braunschweig can be contacted at Story Feedback.