PhoneTel Technologies, Inc. Announces Consummation of Prepackaged Plan of Reorganization - Company Operations

Cambridge Telcom Report, Nov 22, 1999

PhoneTel Technologies, Inc. announced Thursday that its prepackaged plan of reorganization (the "Plan") has been consummated, thus concluding the Company's financial restructuring. In accordance with the terms set forth in the Plan, PhoneTel will convert its 12% Senior Notes due in 2006 (the "Senior Notes") into approximately 95% of the reorganized Company's common stock, with current equity holders sharing in the remaining 5%. In addition, the current equity holders will receive warrants to purchase approximately 1.1 million shares of the reorganized Company's common stock, at an exercise price of $10.50 per share, with a term of three years. These equity interests are subject to dilution by certain other equity issuances, including issuances upon the exercise of certain options and awards to purchase up to an aggregate of 5% of the reorganized Company's common stock, to be granted pursuant to the terms of a new management incentive plan approved as part of the Plan. Claims of employees, trade and other creditors of the Company, other than holders of the Senior Notes, will be paid in full by the Company in the ordinary course unless otherwise agreed.

American Securities Transfer and Trust, Inc. ("AST") located in Lakewood, Colorado will act as the disbursing agent for purposes of exchanging certificates representing the old common and preferred stock for new common stock of the Company. In addition, AST will distribute the warrants issued in connection with the restructuring. During the upcoming weeks, current equity holders will receive a letter of transmittal from AST, with appropriate instructions, advising each holder of the method for surrendering their old common or preferred stock certificates and obtaining new common stock certificates. The newly issued common stock and warrants will be traded on the National Quotations Service Pink Sheets.

As the final step toward consummation of the Plan, the Company also announced that it has entered into a new credit agreement (the "Agreement") with Foothill Capital Corporation ("Foothill") which provides for a $46 Million revolving credit line. The proceeds of the facility have been primarily utilized to repay the principal balance of an existing line of credit. The terms of the Agreement provide for interest on the principal balance at three percent above the base rate and obligate the Company to pay certain fees which become due and payable at various intervals throughout the term of the Agreement. Such fees, at the option of the Company, may be deferred and added to the then outstanding principal balance. Such fees are subject to certain reductions for early prepayment of the principal balance outstanding. The Agreement also includes covenants which require the Company to maintain certain financial ratios and limitations on the incurrence of additional debt, capital expenditures and payment of dividends.

The Company further announced that, as part of the Plan, a new Board of Directors has been appointed. The five member board includes Thomas M. Barnhart, II, Eugene I. Davis, John D. Chichester, the Company's President and Chief Executive Officer, Peter G. Graf and Kevin L. P. Schottlaender. Thomas M. Barnhart, II has been elected to serve as the Company's Chairman of the Board.

PhoneTel Technologies, Inc. is a leading independent provider of pay telephones and related services with operations in 45 states and the District of Columbia. PhoneTel serves a wide array of customers operating in the shopping center, hospitality, health care, convenience store, university, service station, retail and restaurant industries.