Switch and Data (SDXC) may seek to raise up to $300 million through the sale of stock and debt, the company said in documents filed with the SEC on Friday. The filing, known as a shelf registration, gives the company the option of raising the funds through the dale of common stock, preferred stock or debt.
Switch and Data’s largest investors, The CapStreet Group and Seaport Capital, also may sell up to 12.2 million shares of common stock, holdings with a current value of about $204 million. The filing doesn’t provide a timetable for the sales, but gives the company and its investors the flexibility to sell shares ” from time to time in one or more transactions.”
The Tampa-based colocation and interconnection specialist says it will use the funds to repay money it has borrowed to finance the construction of its new data center in North Bergen, New Jersey.
Switch and Data announced the lease of the 163,500 square foot data center in November. The facility is seen as crucial to the company’s expansion to capture business in the New York market. Given the recent credit crunch, shares of SDXC slipped briefly when the company hadn’t arranged funding for the deal prior to its first quarter earnings announcement. But a month later Switch and Data announced that it had lined up $157.5 million in debt financing from a syndicate of banks led by RBC Capital Markets and GE Corporate Lending.
As of March 31, Switch and Data owed $120 million on the credit facility and was paying an interest rate of 8.75 percent. Selling stock to repay the loan would reduce that interest expense.
The shelf registration gives Switch and Data the option of raising the money by issuing common stock, preferred stock, warrants or debt securities. The filing includes a description of a potential debt offering.
Switch and Data hasn’t issued any preferred stock, but the board of directors has authorized the sale of up to 25 million shares without further vote or action by the stockholders. The company noted that issuing preferred stock could delay or prevent a takeover of the company – not an unusual line item, but seemingly a prudent precaution since CapStreet Group and Seaport Capital control about 35 percent of the company’s shares between them.