Primus US parent files for Chapter 11 with debts of AUD$1 billion

Stan Beer
Tuesday, 17 March 2009 03:03

Opinion and Analysis

Primus Telecommunications Group, the US holding company of Primus Telecom Australia has filed for Chapter 11 protection to reduce interest rate payments to creditors on debts totalling US$650 million (about AUD$1 billion). The consensual Chapter 11 filing with creditors will see the debts reduced to US$315 million.

Primus Telecom Australia CEO Ravi Bhatia told iTWire that the restructuring of the holding company's debt would reduce the load on the profitable Australian subsidiary in contributing to interest payments.

At one stage the debt to creditors was US$1.4 billion, which the company paid down by half to US$650 million and this latest Chapter 11 filing would reduce the debt to US$315 million, said Mr Bhatia. The interest on the debts will be cut from US$65 million to US$30 million a year, he added.

Mr Bhatia said the Australian company made a gross profit of $130 million last year and was "holding up well this year".

"We're highly profitable and we were supporting the interest rate obligations of the holding company," said Mr Bhatia.

"The interest obligations of the holding company have reduced by 50 percent so that means we have to send them less and more cash is available for local investment."

Mr Bhatia said Primus Australia at one stage was sending one third of the US$65 million a year debt interest to its US parent to support the debt. Now it will be cut to one third of AUD$30 million a year in interest payments support, to about AUD$10 million.

"It was a hell of a lot," said Mr Bhatia.

"The business in Australia generated a gross profit of $130 million Aussie and we're the only telco who is not sending jobs overseas, we don't outsource and we won't be letting go of people here. This year is so far so good - we're holding up pretty well."

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