Target Information

Front Range BidCo, Inc. (the 'Company') has announced its cash tender offers (the 'Offers') and associated consent solicitations (the 'Consent Solicitations') for its outstanding 6.00% Senior Notes due 2023, 6.375% Senior Notes due 2025, and 5.750% Senior Notes due 2027 (collectively referred to as the 'Notes'). The Notes are co-issued by Zayo Group, LLC and Zayo Capital, Inc. (the 'Co-Issuers'). As of January 31, 2020, the Company reported that it received overwhelming tenders and consents from the holders, including approximately $1.28 billion, or 89.50% of the 2023 Notes; about $862 million, or 95.86% of the 2025 Notes; and around $1.62 billion, or 97.89% of the 2027 Notes.

On the same date, the Co-Issuers and the trustee executed supplemental indentures for each series of Notes to remove most of the restrictive covenants and associated provisions in the existing indentures. These amendments are subject to the condition that the Company must accept a majority of the aggregate principal amount of Notes that have been validly tendered.

Industry Overview

The telecommunications industry has seen significant growth in recent years, particularly in North America. With an increasing demand for data services driven by innovation and technological advancements, companies like Zayo Group Holdings, Inc. are positioned strategically to capitalize on opportunities. The need for reliable bandwidth has become paramount as businesses undergo digital transformations to enhance their operations.

Zayo Group offers extensive infrastructure capabilities, including a 133,000-mile fiber network that connects a multitude of buildings and data centers across North America and Europe. This fiber-rich environment supports high-bandwidth services such as dark fiber, private data networks, and dedicated internet access which are key for enterprises across various industries including tech, finance, and healthcare.

The industry’s dynamics are also influenced by mergers and acquisitions as companies seek to gain competitive advantages and expand into new markets. This trend is reflected in the ongoing merger between Front Range BidCo and Zayo Group Holdings, aiming to create a more robust telecommunications entity capable of serving diverse customer needs.

Rationale Behind the Deal

The primary motivation behind this tender offer is to streamline the Company’s debt situation by providing holders an attractive opportunity to redeem their Notes ahead of maturity. By doing so, the Company intends to simplify its capital structure while also eliminating restrictive covenants that may hinder operational flexibility in the future.

Furthermore, this deal aligns with the anticipated merger with Zayo Group Holdings, ultimately positioning the combined entity for stronger growth and market presence, supporting the ongoing digitalization trends experienced across industries.

Investor Information

The investors involved in this transaction include major financial institutions such as Credit Suisse Securities (USA) LLC and Morgan Stanley & Co. LLC, who are acting as joint-lead dealer managers and solicitation agents for the Offers. These institutions have significant experience in managing debt transactions, which is essential for the consummation of this Offer and the overall merger process.

Notably, Zayo Group Holdings, Inc. is a well-established player in the telecommunications industry, providing critical bandwidth solutions to various enterprises. With its extensive network and diverse service offerings, Zayo is positioned to leverage the increased market share anticipated from the merger, potentially enhancing shareholder value and operational efficiency.

View of Dealert

From an investment perspective, the tender offers by Front Range BidCo represent a strategic maneuver to optimize debt obligations and improve flexibility for the combined company post-merger. The preemptive redemption of the Notes allows the Company to reduce its financial commitments, which could lead to improved cash flow and enhanced operations in the long term.

Furthermore, the high participation rates from bondholders show a favorable market reception towards the proposed amendments and general sentiment regarding the merger. This strong interest implies that the market is optimistic about the potential improvements to the Company's operational landscape and its future performance as part of Zayo.

Overall, while the immediate benefits of the Offers facilitate a smoother transition into the merged entity, the long-term effects will largely depend on the operational synergy realized post-merger. Investors should consider market conditions, operational execution, and integration strategies as factors influencing their outlook on this investment opportunity.

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