GTT to sell assets to pay $3.2bn debt as share price falls

GTT to sell assets to cut $3.2bn debt as share price collapses

12 August 2019 | Alan Burkitt-Gray

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GTT wants to sell non-strategic assets in order to pay down $3.2 billion of debt and focus on cloud networking services.

CEO Rick Calder (pictured), speaking in his quarterly earnings call, did not identify which businesses would be up for sale, but he said that GTT has engaged an advisor to explore options.

The company’s share price has fallen to just $4.90, a price that means GTT’s market cap is now only $378 million, 6% of the $2.3 billion it paid last year for Interoute.

The backlash against GTT in the stock markets at the end of the week follows a long period of intensive acquisitions. “From the beginning of 2017 until now, we have closed and integrated 10 acquisitions and nearly quadrupled the size of the firm,” said Calder. 

A year ago CMO Gina Nomellini told Capacity that in 2018 alone GTT had bought Custom Connect, Interoute, Accelerated Connections (ACI) and most recently Access Point. 

Calder said in the earnings call: “Each of the companies we acquired had a flat or declining trajectory at close. And while we have not yet returned to growth, we have assembled all the right components to return to growth in the future.”

GTT is still buying: last month is said it would buy KPN’s global IP network, KPN International, for €50 million in cash. That deal is likely to close in the fourth quarter, Calder said in the earnings call.

“The Interoute integration is now substantially complete,” he said. “We are still experiencing some post integration challenges with our billing and collections function in Europe, and converting billing systems is never easy.”

He said that, “while Interoute is not the most complex integration we’ve ever done, it was certainly the largest”, adding: “Revenue and cash flow were negatively impacted during the quarter as we continue to work with many of our European clients to answer all of their questions about the new build format, fix any data errors and issue-related credits.”

He said: “With the Interoute integration behind us, we expect to drive increasing levels of free cash flow, defined as operating cash flow, less capex, with a target of generating $175 million to $200 million of free cash flow in 2020.”

He said the company is standardising its design and deployment of SD WAN, “which represents approximately 25% of our current installed backlog”, and said GTT would be “automating many of our current manual processes”.