Surf Internet is the latest broadband provider to obtain financing via asset backed securitization (ABS). The $407 million deal is secured by network assets and associated revenues, said Ryan Delack, chief financial officer for Surf Internet, in an email in response to questions from Telecompetitor.
“The transaction includes only fiber network assets and associated revenues,” Delack said.
Asked whether the financing was secured with all the company’s fiber assets or only in certain markets, Delack said “the ABS includes only the most mature portions of Surf’s fiber footprint.”
Surf Internet is focused on the Great Lakes region of Illinois, Indiana, and Michigan. The company recently completed its 250,000th fiber passing and has been successful in winning government funding to cover some of its deployment costs.
ABS basics
ABS provides financing secured by only a portion of a company’s total assets. The ABS approach is relatively new among broadband providers. Deals are typically secured with fiber assets and associated revenues. These are considered low-risk revenues, so lenders generally are willing to offer favorable terms for the borrower.
The ABS financing in the Surf Internet deal comes in the form of a $332 million offering of secured fiber network revenue term notes and a $75 million variable funding note facility.
Goldman Sachs was the sole structuring agent and placement agent.
In a prepared statement, Delack called the deal “an important milestone in Surf’s continued evolution as a scaled and disciplined super-regional fiber platform.”
He said that the company’s “strong operating performance and consistent subscriber growth have enabled us to access the capital markets in a way that enhances our financial flexibility and supports long-term value creation.”
A key goal is to accelerate network expansion.
Other broadband providers that have obtained ABS financing like Surf Internet include Fidium (formerly Consolidated Communications), Frontier, Zayo, Ting and Altice. All the companies except Altice secured their financing with fiber assets. Altice’s securitization was based on hybrid fiber coax assets.
