Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Management believes that as of March 31, 2024, there have been no material changes to our risk factors from those disclosed in Item 1A “Risk Factors,” of our annual report on Form 10-K for the year ended December 31, 2023, except as noted below.
We have substantial debt, which we may not be able to repay when due.
Our total indebtedness, at par, at March 31, 2024 was $1.5 billion and includes $500.0 million of our 3.50% senior secured notes due in May 2026 (“2026 Notes”) and $450.0 million of our 7.00% senior unsecured notes due in June 2027 (“2027 Notes”). Our 2026 Notes require interest payments of $17.5 million per year and our 2027 Notes require interest payments of $31.5 million per year, each paid semi-annually. All of our noteholders have the right to be paid the principal and any applicable premium upon an event of default and upon certain designated events, such as certain changes of control. Our total indebtedness at March 31, 2024 included $517.5 million of finance lease obligations for dark fiber primarily under 15 to 43 year IRUs. Our total indebtedness March 31, 2024 excludes $387.5 million of operating lease liabilities which were required to be recorded as right-to-use assets and operating lease liabilities. The amount of our IRU finance lease obligations may be impacted due to our expansion activities, the timing of payments and fluctuations in foreign currency rates. Subsequent to March 31, 2024, our indirect wholly owned subsidiary issued $206 million of secured IPv4 address revenue notes, pursuant to the Securitization completed on May 2, 2024. If we do not have sufficient funds to pay the interest, principal and premium related to these obligations at the time we are obligated to do so, we could be forced into in bankruptcy, or we may only be able to raise the necessary funds on unfavorable terms.
The agreements governing our various debt obligations impose restrictions on our business and could adversely affect our ability to undertake certain corporate actions.
The agreements governing our various debt obligations include covenants imposing significant restrictions on our business. These restrictions may affect our ability to operate our business and may limit our ability to take advantage of potential business opportunities as they arise. These covenants place restrictions on our ability to, among other things:
● incur additional debt;
● create liens;
● make certain investments;
● enter into certain transactions with affiliates;
● declare or pay dividends, redeem stock or make other distributions to stockholders; and
● consolidate, merge or transfer or sell all or substantially all of our assets.
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In addition, our IPv4 address securitization facility requires us to maintain a specified debt service coverage ratio. Failure to maintain the debt service coverage ratio at a specified triggered level could adversely affect our business, including full or partial amortization or an event of default, as applicable. Our ability to comply with these agreements may be affected by events beyond our control, including prevailing economic, financial and industry conditions. These covenants could have an adverse effect on our business by limiting our ability to take advantage of financing, merger and acquisition or other corporate opportunities. The breach of any of these covenants or restrictions could result in a default under the agreements governing our debt obligations.
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