NEWSOUTH COMMUNICATIONS RECEIVES $62.5 MILLION
IN EQUITY FINANCING
Investment From KKR, Wachovia Capital Partners,
M/C Venture Partners,
Quadrangle Group, and Vaxa Capital Partners
Seeds Future Growth of NewSouth
GREENVILLE, S.C., March 5
-- NewSouth Communications, an Integrated Communications
Provider (ICP) serving thousands of business
customers across the South, today announced
that it has received $62.5 million in equity
financing. Firms participating in this round
of financing include three existing investors,
Kohlberg Kravis Roberts & Company (KKR),
who remains NewSouth's largest investor, Wachovia
Capital Partners, and Vaxa Capital Partners,
LP. Also participating are two new investors,
M/C Venture Partners and Quadrangle Group LLC.
This investment will be used to fund the continued
growth of the business, and fully funds NewSouth
to profitability.
This equity investment follows NewSouth's announcement
last month of excellent 2002 financial and operational
results, marked by a 25 percent increase in
total revenue to $156 million, a 31 percent
increase in the number of lines installed, and
a 9 percent reduction in SG&A expense. Operating
cash flow in 2002 exceeded the company's plan
by $17 million.
"NewSouth is now generating positive operating
cash flow each month, and this investment will
provide substantial opportunities for accelerated
growth and profitability in the future. The
demand for our data, voice, and bundled products
is growing, and we are further penetrating each
of our markets in the Southeast. The support
from our existing investors, combined with participation
from two additional exceptional private equity
groups in M/C and Quadrangle, absolutely positions
NewSouth as a leader in the communications space,"
commented Jim Akerhielm, President & CEO
of NewSouth Communications.
"Today, NewSouth is well capitalized to
build on its solid foundation and proven track
record in delivering communications solutions
to medium to large business customers. In differentiating
itself from other providers through disciplined,
controlled growth and spending, NewSouth has
clearly shown the strength of its strategy.
KKR looks forward to continuing to work with
Jim Akerhielm and his team to drive NewSouth's
growth and success over the long term. We are
very enthusiastic about NewSouth's future and
being an active player in the company's success,"
stated James H. Greene, Jr., Member of KKR LLC,
the general partner of KKR, and a director of
NewSouth.
"M/C was attracted to NewSouth for a wide
variety of reasons. The quality of NewSouth's
customer base, almost exclusively medium and
large business customers, combined with the
proven expertise of the management team, made
this deal a very good fit for M/C. We are looking
forward to working with the NewSouth team and
seeing very strong financial results going forward,"
commented James F. Wade, Managing Partner with
M/C Venture Partners and a new director of NewSouth.
Joshua L. Steiner, Managing Principal of Quadrangle
and a new director of NewSouth, said, "We're
delighted to partner with Jim Akerhielm and
the entire NewSouth team. By focusing on superior
customer service and network reliability, Jim
and his team have built a sustainable telecommunications
company with tremendous growth prospects. We
look forward to contributing to NewSouth's continued
success."
The Board of Directors at NewSouth Communications
will expand to a 12- member body as a result
of the investment. KKR, Wachovia Capital Partners,
M/C Venture Partners, and Quadrangle Group will
be allocated two seats each; one seat is for
Jim Akerhielm, President & CEO of NewSouth;
and the remaining three seats will be filled
by independent directors, including R. Clint
Johnstone, who will continue to serve as Chairman
of the Board, Leighton Cubbage, and John Fujii.
Wachovia Capital Partners made its initial
investment in NewSouth Communications in 1998,
while both KKR and Vaxa Capital Partners participated
for the first time in July 2000.
"Wachovia Capital Partners is excited
to remain closely involved with the pre- eminent
communications provider in the Southeast. NewSouth
has grown successfully in a difficult economic
environment. The completion of this financing
is a very strong endorsement of NewSouth's excellent
management team," added Scott B. Perper,
Managing Partner of Wachovia Capital Partners
and a director of NewSouth.
NewSouth Communications was advised in this
transaction by Sonenshine Pastor and King &
Spalding LLP. Other terms of the agreement were
not disclosed.
About NewSouth Communications:
Headquartered in Greenville, South Carolina,
NewSouth Communications is a privately held
broadband ICP serving business customers in
Florida, Georgia, South Carolina, North Carolina,
Tennessee, Alabama, Kentucky, Mississippi, and
Louisiana. The company offers a comprehensive
selection of data, Internet, voice, and other
advanced communications solutions, including
the recently launched Suite T, a bundled product
for medium and large customers. NewSouth Communications
was founded in 1997, and has a fully deployed
network, which includes the Tekelec VXi MGC
softswitch, Cisco packet-based switches, Lucent
Technologies, Inc. AnyMedia(TM) 5ESS-2000 switches,
Siemens Information and Communications Networks
EWSD digital switches, and 80 collocations across
the South. For more information, visit www.newsouth.com.
About KKR:
KKR is a private investment firm headquartered
in New York; Menlo Park, California; and London.
Since its founding in 1976, KKR has completed
more than 100 transactions involving more than
$110 billion of total financing. For more information,
visit www.kkr.com.
About Wachovia Capital Partners:
Wachovia Capital Partners, with $1.3 billion
of invested equity capital, is the private equity
investing arm of Wachovia Corp., the nation's
fourth largest bank holding company. Wachovia
Capital Partners targets investments of $10
to $ 50 million in growth industrial, business
services, financial services, media and communications,
healthcare, and energy opportunities. For more
information on Wachovia Capital Partners, visit
www.wachoviacapitalpartners.com.
About M/C Venture Partners:
M/C Venture Partners has long been recognized
as one of the most active venture capital investors
in the emerging communications and IT industries.
The firm has invested in early-stage companies
across these segments for over 20 years. The
firm manages over $1 billion in assets, including
the nation's largest state and corporate pension
funds, prominent university endowments, private
trusts, and strategic financial institutions.
The firm has offices in Boston and London. For
more information, visit www.mcventurepartners.com.
About Quadrangle Group LLC:
Quadrangle Group LLC manages Quadrangle Capital
Partners LP, a private equity fund that specializes
in the media and communications industries.
The firm also invests in financially troubled
companies across industry groups through a separately
managed distressed debt hedge fund investment
program. Quadrangle Group was founded in March
2000 by four former Managing Directors of Lazard
Freres & Co. LLC who have more than 60 years
of combined experience in private equity and
in media and communications. For more information,
visit www.quadranglegroup.com.
Vaxa Capital Partners, LP:
Vaxa Capital Partners, with offices in Greenville,
SC, and Charlotte, NC, is an experienced private
equity firm serving as equity partner to growing
companies like Crescent Publishing, LLC. Vaxa
Capital also invests in acquisitions, management
buyouts, owner recapitalizations, and industry
consolidations. Vaxa Capital invests in a broad
spectrum of businesses such as media & publishing,
telecommunications, plastics & film manufacturing,
and other manufacturing, distribution, and service
companies. For more information, visit www.vaxacapital.com.
Contacts:
NewSouth Communications Corp
Susanne Hite,
+1-864-672-5097,or
e-mail: hite@newsouth.com
Ashley Creech,
+1-864-672-5289, or
e-mail: acreech@newsouth.com
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