BILL.L Regulatory News (BILL)

2 Apr 2007 07:04

Billing Services Group Limited02 April 2007 Not for release, publication or distribution, in whole or in part, in, into orfrom the United States, Canada, Ireland, Australia or Japan, or any otherjurisdiction where to do so would constitute a violation of the relevant laws ofsuch jurisdiction. 2 April 2007 Billing Services Group Limited ("BSG" or the "Company") Proposed: Disposal of Wireless Business for $290m in cash; $105m underwritten Refinancing of continuing Wireline Business; and one-time cash payment to Shareholders BSG, one of the telecommunications industry's leading clearing and settlement,payment and financial risk management solutions groups, today announces: • the proposed sale of its European Wireless Business to Syniverse Technologies, Inc. ("Syniverse") for $290 million in cash; • a $105m refinancing of its continuing Wireline Business resulting in a lower debt-to-EBITDA ratio than that of the current BSG Group, with an underwritten facility through Morgan Stanley Senior Funding, Inc.; • upon Completion the Company will repay its existing debt facilities of approximately $250m; • Shareholders to receive a one-time cash payment of between 20 to 22 pence per Common Share, subject to completion of the transactions; • future strategic focus to be on its cash-generative, market-dominant North American Wireline Business, which accounted for approximately 60% of the group's 2006 pro-forma EBITDA; • the intention to initiate regular payments of dividends from the highly profitable Wireline Business; • the ongoing business will also continue - o the current expansion into financial payment services; and o to benefit from already established, increasing cost efficiencies; and • the Board has received financial advice in relation to the Disposal from Morgan Stanley. Commenting on developments, Randall Brouckman, Chief Executive Officer of BSGsaid: "I am delighted to report today better than expected financial and operatingresults, the conclusion of our strategic review, the refocusing of our businessthrough the proposed disposal of our Wireless operations and the payment of aone-time cash payment to shareholders. "Today's developments and separately released financial results clearlydemonstrate the value in our Wireless business and the highly cash generativenature of our Wireline business. These transactions enable us to maximiseshareholder value through both the positive return for shareholders whilemaintaining a basis for future growth. "Subject to the necessary approvals, we can now concentrate attention on growingour Wireline business as we seek to create further value for shareholders fromgrowth through a more targeted and financially unencumbered business and theregular payment of dividends." ENQUIRIES Billing Services Group Limited +44 (0)20 7071 4300Randall W. Brouckman, CEO (for 2 April 2007 only)Norman M. Phipps, CFO Evolution Securities Limited +44 (0)20 7071 4300Stuart AndrewsFergus Marcroft The Hogarth Partnership +44 (0)20 7357 9477Julian Walker A conference call with analysts and investors will take place at 0900hrs BSTtoday, 2 April 2007. Dial in details are +44 (0)20 7138 0818 FORWARD-LOOKING STATEMENTS This announcement includes 'forward-looking statements'. These forward-lookingstatements may contain the words "anticipate", "believe", "intend", "estimate","expect" and words of similar meaning. All statements other than statements ofhistorical facts included in this announcement, including, without limitation,those regarding BSG, the BSG Group or Continuing Group's financial position,business strategy, plans and objectives of management for future operations(including development plans and objectives relating to products and services)are forward-looking statements. Such forward-looking statements involve knownand unknown risks, uncertainties and other important factors that could causethe actual results, performance or achievements of BSG, the BSG Group orContinuing Group's to be materially different from future results, performanceor achievements expressed or implied by such forward-looking statements. Suchforward looking statements are based on numerous assumptions regarding BSGpresent and future business strategies and the environment in which BSG, the BSGGroup or Continuing Group's will operate in the future. These forward-lookingstatements speak only as at the date of this announcement. BSG expresslydisclaims any obligation or undertaking to disseminate any updates or revisionsto any forward-looking statements contained herein to reflect any change inBSG's expectations with regard thereto or any change in events, conditions orcircumstances on which any such statement is based except to the extent requiredby applicable law, and regulations. Disposal of Wireless Business Reduction of Share Capital and Notice of SpecialGeneral Meeting 1. Introduction The Company announces that following a competitive sale process, it has enteredinto a conditional agreement for the disposal of its Wireless Business toSyniverse (NYSE: SVR) for $290 million in cash and a $105 million refinancingcommitment for its continuing Wireline Business from Morgan Stanley SeniorFunding, Inc. Further information on the Disposal and the Refinancing isprovided in Paragraph 13 of this announcement. The size of the proposedtransaction means that the Disposal is deemed to result in a fundamental changeof business under the AIM Rules and, consequently, the Shareholders are requiredto approve it. The Directors intend that part of the proceeds from the Disposal and theRefinancing will be used to repay the Company's existing credit facilities withDeutsche Bank (amounting to approximately $250 million). It is then anticipatedthat a distribution of cash of between 20 to 22 pence per Common Share will bemade to Shareholders from the remainder by means of a reduction of capital ofthe Company (such reduction being dependent on the approval of Shareholders).Further information on the use of proceeds is provided in Paragraph 8 of thisannouncement. Completion of the Disposal, the Refinancing and the reduction of capital toShareholders is conditional, inter alia, upon (i) approval of the Disposal andreduction of capital by the Shareholders and (ii) clearance of the Disposal bycertain regulatory bodies in respect of competition issues. Further details ofthe conditions in respect of the Disposal are set out in Paragraph 13.1 of thisannouncement. In addition the Refinancing, whilst legally binding, remainsconditional on the conditions precedent summarised in Paragraph 13.2 of thisannouncement. There can be no assurance that the Disposal, the Refinancing orthe reduction in capital (as described) will be completed. 2. Information on BSG The Company is a leading global provider of payment processing, clearing andsettlement, and risk management solutions for wireless and wirelinecommunication service providers. The Company manages critical call detailrecords and transactional billing information for some of the world's largestvoice and data communications companies and offers an extensive portfolio ofclearinghouse, information management and technology services. 2.1. Corporate History BSG organised its Wireline Business in 2003 through the simultaneousacquisitions of BC Holdings I Corporation, the parent company of BillingConcepts, Inc., and Enhanced Services Billing, Inc., and the contribution byAvery Communications, Inc. of Thurston Communications Corporation and its twolocal exchange carrier billing subsidiaries, ACI Billing Services, Inc. and HBSBilling Services Company. The transaction closed on 15 December 2003. The CommonShares of the Company were admitted to AIM on 15 June 2005. BSG has grown organically and through a number of strategic acquisitions throughwhich it has expanded its global footprint. In August 2005, BSG acquired EDSInteroperator Services GmbH, a leading pan-European wireless telecommunicationsGSM clearinghouse based in Russelsheim, Germany, marking the first step in BSG'sEuropean and Wireless Business expansion initiatives. In March 2006, BSGacquired United Clearing plc, a London-based outsourcing support servicescompany providing specialist financial clearing and settlement to leading globalwireless carriers, to broaden its financial settlement and clearing servicescapabilities. Since these acquisitions in the wireless sector, the Company hasexpanded its wireless operations into Asia, North America and South America.On 30 June 2006, the Company further expanded its wireline product offering withthe acquisition of certain assets of VoiceLog, the leading provider of automatedthird party verification solutions. 2.2 Information on the Wireline Business Billing clearing house and information management services, or LEC (LocalExchange Carrier) billing, developed out of the 1984 break-up of AT&T and theBell System. In connection with the break-up, the local telephone companies thatmade up the regional Bell Operating Companies, Southern New England Telephone,Cincinnati Bell and the General Telephone Operating Companies were required toprovide billing and collections on a non-discriminatory basis to all carriersthat provided telecommunication services to their end-user customers. To establish such a billing arrangement the new competitors had to set upbilling contracts with these entities, which included significant up frontcharges as well as ongoing charges for processing call records. The contractswere structured to give discounted rates per call record based on volume.Due to both the cost of acquiring and the minimum charges associated with manyof the local telephone company billing and collection agreements, only thelargest long distance carriers, including AT&T, MCI, and Sprint, could affordthe option of billing directly through the LECs. As a result, billing clearinghouses were established. The billing clearing houses agreed to high volume, lowcost billing contracts with the LECs, and began offering billing clearing houseservices to those smaller telecom operators who could not afford direct billingarrangements. BSG is now the largest entity providing these services to thetelecommunications industry as a result of its successful industryconsolidation. The Company currently has approximately 90 per cent. of the USmarket share for these clearing and settlement services. Additionally, theCompany has recently completed a successful re-write of its software systems tofurther automate functions and allow the more rapid introduction of new serviceofferings. 2.3 Information on the Wireless Business The Wireless Business offers third party financial and data clearinghouseservices to mobile carriers globally through its locations in London, U.K. andRusselsheim, Germany. Although, the Wireless Business focuses on the mobileroaming market the Company has also developed and sells a wide variety of valueadded services related to roaming. Mobile Roaming The mobile roaming clearing market developed from the complex relationshipbetween the mobile phone subscriber, the home operator network and the visitedoperator network. The introduction of a billing intermediary provided millionsof customers via hundreds of billing companies with a single relationship.Similarly, the billing intermediary allowed a billing company or networkoperator to support hundreds of service providers with a single relationship.This many-to-many relationship management translates into lower operating costfor both the service provider and the billing company, which thereby helps tolower service costs to the consumer. Mobile roaming provides a wireless subscriber with the ability to roam based onits home operators agreement and with a mobile operator located in the visitedregion. Roaming can be national or international. In either case, the roamingagreement between operators determines the terms on which the operators billeach other for network usage. When a mobile subscriber roams in a visitednetwork call detail records are generated by the visited operator and need to besettled with the home network of the subscriber. 3. Background to and reasons for the Disposal In August 2006 the Board resolved to undertake a strategic review of thebusiness in order to maximise value for Shareholders. This decision followed itsreceipt of a number of unsolicited enquiries from third parties, includingstrategic acquirors and financial sponsors. As a result, the Company engagedMorgan Stanley in late September 2006 to analyse and evaluate various optionsavailable to the Board. In connection with this process, the Company authorisedMorgan Stanley to conduct an auction process in respect of all and/or part ofthe business. After reviewing all of the proposals the Company determined that the best optionavailable to maximise current and ongoing shareholder value is to focus thebusiness on its dominant Wireline Business and to accept the Syniverse proposalto acquire the Company's Wireless Business for $290 million in cash. The Board's decision to adopt this strategy is based on a number of factors: • the offer from Syniverse for the Wireless Business represents a valuation level that is at a substantial premium to the Company's current valuation multiple and represents a sizeable return on the Company's investment, set against a market need for scale economies in an increasingly competitive global telecommunications marketplace; • the offer, together with the proposed Refinancing and associated reduction of capital, allows the Company an opportunity to make a substantial cash payment to Shareholders expected to be between 20 to 22 pence per Common Share; • the Wireline Business accounted for, on an 'as reported basis', approximately 75 per cent. of revenues and 60 per cent. of EBITDA (before corporate expenses); • following the Disposal, the Company will have significantly reduced its debt from $250m to $105m and, as a result, will reduce its debt-to-EBITDA ratio from over 4 times to less than 3 times on a pro forma trailing twelve month basis; • the Board believes that the Company's reduced debt level and the strong cash generative nature of its Wireline Business will enable the payment of an ongoing annual dividend; • the re-focused Company is well positioned to capture a number of growth opportunities: it has recently introduced a series of new payment and risk management services, including credit card payments, Bill2Phone (TM) and payment fraud detection; and • the Wireline Business' enhanced services product offering has demonstrated continued growth. 4. Financial Information Shareholders should read the full audited results set out in a separateannouncement released today and not rely solely on the summary of the resultsset out below which have been extracted without material adjustment from thatannouncement. 4.1 Audited Results for the year ended 31 December 2006 Audited Year ended 31 December 2006 $'000Turnover 179,416Operating income before depreciation, amortisation, restructuring expense, other non-recurring expenses and stock-based compensation expense 49,385Total assets 482,983 4.2 Summary financial information on the Wireline Business Audited Year ended 31 December 2006 $'000Turnover 136,062Operating income before depreciation, amortisation, restructuring expense, other non-recurring expenses and stock-based compensation expense 27,778Total assets 226,210 4.3 Summary financial information on the Wireless Business Audited Year ended 31 December 2006 $'000Turnover 43,354Operating income before depreciation, amortisation, restructuring expense, other non-recurring expenses and stock-based compensation expense 21,607Total assets 256,773 5. Principal terms of the Disposal Under the Disposal Agreement, which was signed on 1 April 2007, the Company hasconditionally agreed to sell the Wireless Business to the Purchaser. The purchase price for the Wireless Business is $290 million, payable in cash onCompletion. The Disposal Agreement contains warranties which are customary for atransaction of this nature. After Completion, the Company has no liability underany of the warranties under the Disposal Agreement. The Disposal, is conditional, amongst other things, upon the approval of BSGShareholders at the SGM and clearance by certain regulatory authorities inrespect of certain competition issues. The parties shall each be entitled toterminate the Disposal Agreement if the conditions to that agreement are not meton or before 17 December 2007. Certain fees are payable in the event oftermination of the Disposal Agreement if certain conditions are not met,including where Shareholder approval for the Disposal is not obtained.Further information on the Disposal and the principal terms and conditions ofthe Disposal Agreement are set out in Paragraph 13.1 of this announcement. 6. Principal terms of the Refinancing The Company and BSG North America entered into a fully underwritten commitmentpursuant to a commitment letter from Morgan Stanley Senior Funding, Inc. dated 1April 2007 whereby Morgan Stanley Senior Funding, Inc. will provide certain loanfacilities to the Continuing Group. The commitment is subject to satisfaction ofcertain conditions precedent which are customary in transactions of this kind.The loan facilities to be made available pursuant to the commitment will consistof a $105 million term loan and a $10 million revolving credit facility,unfunded at closing. All the obligations under the loan facilities will be unconditionally guaranteedby the subsidiaries of BSG North America and will be secured against all of theassets of BSG North America and its subsidiaries. The loan documentation, which will, on satisfaction of conditions precedent beentered into in due course, contain warranties, covenants and obligations whichare customary in a financing of this nature. Further information on the Refinancing and the principal terms and conditions ofthe Refinancing are set out in Paragraph 13.2 below. 7. Reduction of capital In order to maximise value for Shareholders, the Directors are proposing areduction of capital of the Company, which will occur shortly after and isconditional on Completion. The reduction of capital is expected to result in areturn of cash to Shareholders and of between 20 to 22 pence per Common Share.This represents cancellation of paid-up capital which will be unrepresented byavailable assets after the Disposal. The Companies Act requires the reduction tobe advertised in Bermuda no more than 30 and no less than 15 days before thereduction is to take effect. Further, for the reduction to be effected, theremust be no reasonable grounds for believing that on the date the reduction is totake effect, the Company is, or after the reduction would be, unable to pay itsliabilities as they become due. 8. Use of Proceeds and Financial Effects of the Disposal and the Refinancing The proceeds receivable by the Company from the Disposal are expected to be $290million (before the payment of fees and other costs). The proceeds receivable by the Company from the Refinancing are expected to be$105 million (before the payment of fees and other costs). The Disposal will trigger mandatory prepayment of the Company's existing creditfacilities with Deutsche Bank. These facilities amount to approximately $250million and will be repaid from the proceeds of the Refinancing and theDisposal. Following repayment of the Deutsche Bank credit facilities, the Boardanticipates having adequate funding to be to make a payment in cash toShareholders. This payment will be effected by the Company reducing its capital(as described above) which is expected to result in a cash payment toShareholders of approximately 20 to 22 pence per Common Share. On the basis of advice received, the Board believe that a reduction of capitalis the most efficient method of making the proposed payment to Shareholders. Theproposed reduction of capital would require Shareholder approval and it isintended to convene a special general meeting of the Company, inter alia, forthis purpose. 9. The Continuing Group following the Disposal 9.1 Strategy The Company has a dominant position in its wireline clearing and settlementofferings with a leading market share of approximately 90 per cent. inthird-party LEC clearing in North America. In addition to this, the Company has: • recently acquired and successfully integrated the assets of VoiceLog, the leading provider of automated third party verification; • successfully introduced a suite of new payment services which will drive its migration from a pure LEC clearinghouse to a full service payment and risk services transaction company; • implemented a successful cost reduction program in late 2006; and • managed the expected secular decline of the traditional one plus business, in line with the Board's expectations. Going forward, the Company will have a strong cash generative business model, aleading market position and only modest leverage, which will enable it to: • continue to focus on ensuring efficient delivery of operations; • nurture new growth areas; • implement further cost savings in the ongoing business facilitated by the disposal; • introduce a policy for the payment of regular annual dividends; and • make strategic and accretive acquisitions when appropriate. 9.2 Growth areas The Board has identified numerous growth opportunities which it believes willmore than offset the expected continued decline in the traditional one plusbusiness and these include the: • continued expansion of its enhanced services core product offering, which has grown at a CAGR of 57.8 per cent. over the period from 2001 through 2006; • ongoing growth in its core 0+/0- clearing and settlements offering; • rapid expansion of its new payment services product offerings, including Bill2Phone (TM) and credit card payments. Bill2Phone (TM) is the new BSG branded offering that allows content merchants to place charges on the phone bill for digital content such as music, movies, personals and games; growth of the new integrated risk services, introduced in 2006 and using state-of-the-art technology, proprietary and commercial databases and industry-leading expertise; and • continued expansion in its VoiceLog business, the leading automated third party verification business, which won 19 new contracts signed in the first three months of 2007. 9.3 Dividend Policy The Continuing Group will be characterized by a cash generative business modeland benefit from relatively modest leverage and a leading market position. Thesefactors lead the Board to believe that the business will support an ongoingannual dividend. BSG is currently classified as a partnership for US federal income tax purposes;for such purposes each Common Share should be viewed as a partnership interest.The Company has been advised that in the event of the Disposal, such a holdingcompany structure would reduce the amount of cash available to BSG as theholding company for the Continuing Group for distribution to Shareholders. Inthe event that the Disposal is completed, it is intended to put proposals toShareholders to reorganize the Continuing Group to create a corporate structurebetter aligned to the on-going needs of the Continuing Group and itsShareholders. As part of this reorganisation it is anticipated that BSG wouldcease to be treated as a partnership for US federal income tax purposes thatthis would increase the proportion of cash received by non-US Shareholders inany post-reorganisation distribution. 10. Current Trading and Future Prospects BSG's market-leading Wireline Business has begun the current year well with 28new wireline, credit card and ancillary service agreements and 19 new VoiceLogcontracts signed to date. The Wireline Business has introduced the APG(TM) suiteof services including the Bill2Phone (TM) solution for content merchants. In itsWireless Business, BSG has signed seven new data clearing and seven newfinancial clearing contracts and continues to offer new value added services.The Board firmly believes that the Continuing Group, with its tighter growthstrategy and clarity, stronger balance sheet and dominant market share, will bewell positioned to capitalise and build on these early successes. 11. Special General Meeting The Disposal is conditional upon Shareholder approval. In addition, the proposedreduction of capital by which the Company intends to make a payment ofapproximately 20 to 22 pence per Common Share to Shareholders will also requireShareholder approval (the disposal is not conditional upon approval of the proposed reduction of capital). A circular and notice convening a special general meeting of the Company for these purposes will be posted to Shareholders shortly. 12. Financial Advice The Board has received financial advice in relation to the Disposal from MorganStanley. In providing financial advice to the Board, Morgan Stanley has reliedupon the Directors' commercial assessment of the terms of the Disposal. 13. Further information 13.1 Summary of the Principal Terms and Conditions of the Disposal The Company entered into the Disposal Agreement on 1 April 2007 with thePurchaser and Syniverse whereby the Company has agreed to sell all of the sharesof BSG Luxembourg and BSG Asia to the Purchaser. BSG Luxembourg holds 100 percent. of the shares of each of BSG Clearing Solutions GmbH, United ClearingLimited and BSG Clearing Solutions UK Limited. The Disposal Agreement isgoverned by the laws of England. Consideration The total consideration to be paid by the Purchaser to the Company is $290million payable at Completion in cash. The Purchaser's payment obligation isguaranteed by Syniverse. Conditions to Completion Completion of the Disposal is conditional upon fulfilment (or waiver) of thefollowing conditions: (a)the consent of the Shareholders; (b)certain governmental approvals having been obtained (as set out in further detail in the paragraph entitled "Competition Clearance" below); (c)compliance by the Company with certain obligations which are customary in a transaction of this nature; (d)certain limited warranties given by the Company being true and correct in all material respects at Completion; (e)certain limited warranties given by the Purchaser being true and correct in all material respects at Completion; and (f)the terms of the proposed transaction not becoming illegal. Competition Clearance Completion of the Disposal is conditional upon certain competition conditionsbeing satisfied before the Long-Stop Date (the date which is 180 business daysfrom the date of the Disposal Agreement which may also be extended). Thecompetition conditions are: (a)receipt of necessary competition authority approvals; or (b)expiry of the relevant waiting period without any objection being raised by any relevant competition authority. Undertakings of the Company up to Completion The Disposal Agreement contains certain undertakings given by the Company to thePurchaser in relation to the conduct of the business and affairs of the WirelessBusiness during the period up to Completion. The Company has undertaken that itwill conduct the Wireless Business in the ordinary and usual course consistentwith past practice in the period up to Completion. In addition, the Company hasprovided certain other undertakings as to specific actions which may not occurin relation to the Wireless Business in this period. Warranties Under the Disposal Agreement, the Company has given certain warranties to thePurchaser which are customary for a transaction of this nature, includingwarranties concerning their title to and ability to sell the shares in BSGLuxembourg and BSG Asia, its transactions with its affiliates, its accounts andfinancial matters and advisers' fees. Following Completion no member of the Purchaser's group shall be able to bring aclaim against the Company or any member of the Continuing Group in respect ofthe warranties given by the Company under the Disposal Agreement. Non-solicitation of other offers Prior to Completion the Company has agreed that it will not (i) solicit furtherbids for the Wireless Business, the Company or the assets of either, or (ii)recommend any other offer for the Wireless Business or the Company. Prior toobtaining Shareholders' consent to the Disposal the Company may provideinformation and negotiate with unsolicited offerors if the Board has notifiedthe Purchaser and believes such unsolicited offer would result in a morefavourable transaction (a "Superior Proposal"). The Purchaser shall have theright to match a Superior Proposal provided that such matched offer shall be atleast 5 per cent. higher in value and be on terms which are not materiallyworse. Where a Superior Proposal is for the Company the Purchaser's matchedoffer may be for either the Company or the Wireless Business combined with athird party offer for the Wireline Business. The Board will be obliged torecommend such a matched offer from the Purchaser. Termination Rights and Fees Prior to Completion the Disposal Agreement may be terminated in the followingcircumstances: (a)by mutual written agreement of the Company, the Purchaser and Syniverse; (b)by the Company or the Purchaser if Completion has not occurred prior to 17 December 2007; (c)by the Company or the Purchaser if the consent of the Shareholders is not obtained; (d)by the Company if the Purchaser fails to pay the consideration; (e)by the Company, prior to the consent of the Shareholders, in order to enter into a Superior Proposal; (f)by the Purchaser if certain conditions are not satisfied; or (g)by the Purchaser if the Board withdraws its recommendation for the Disposal or recommends a Superior Proposal or enters into an agreement for a Superior Proposal. A break fee of $10 million is payable by the Company to Syniverse on theoccurrence of the termination events in (e), (f) and (g) above. The obligationto pay the break fee under (f) is only if the Company has also entered into anagreement with a third party to sell the Company or the Wireless Business within6 months of the date of termination by the Purchaser. If the Disposal Agreement is terminated pursuant to (c) above the Company shallpay Syniverse's expenses up to an amount of $3 million. If the Company terminates the Disposal Agreement pursuant to (d) above Syniverseis obliged to pay the Company a reverse break fee of $25 million. Guarantee All of the Purchaser's obligations under the Disposal Agreement are guaranteedby Syniverse. Confidentiality and Non-solicitation Agreement By a separate agreement the Company has agreed that for a period of five yearsafter Completion, it will not and will cause its affiliates to not use ordivulge any confidential information relating to the Wireless Business. Further,the Company has agreed that during the same period, it will not solicit any ofits current or former employees for any business arrangements or employment,unless such an employee has not been employed by the Purchaser for at least oneyear prior to such solicitation. The agreement is governed by the laws of theState ofDelaware. 13.2 Summary of the Principal Terms and Conditions of the Refinancing BSG North America has entered into a fully underwritten commitment pursuant to acommitment letter from Morgan Stanley Senior Funding, Inc. ("MSSF") dated 1April 2007 whereby MSSF will provide certain loan facilities (the "Facilities")to certain subsidiaries of the Continuing Group. The commitment letter is, andthe loan documentation shall be, governed by New York law. Parties The borrower under the Facilities will be BSG North America. The lead arranger,syndication agent and administrative agent will be MSSF. The lenders will beMSSF and a syndicate of financial institutions and institutional lendersarranged by MSSF in consultation with the borrower (the "Lenders"). All obligations under the Facilities shall be unconditionally guaranteed byNorth America and each of its direct and indirect wholly-owned subsidiaries(other than the borrower and those foreign subsidiaries that would have anadverse tax consequence from guaranteeing the Facilities) on a senior securedbasis. Facilities The Facilities shall consist of: (a)a tranche B term loan facility for an amount of $105 million (the "Term Loan Facility"); and (b)a revolving credit facility of $10 million (the "Revolving Credit Facility"). Maturity (a)The final maturity of the Term Loan Facility shall be the seventh anniversary from the draw-down date of the facility, when the loans under the Term Loan Facility shall be repaid, subject to amortization in equal quarterly installments at a rate of approximately 1 per cent. per annum prior to such maturity date, commencing in the first fiscal quarter following the Closing Date. (b)The final maturity of the Revolving Credit Facility shall be the sixth anniversary of the Closing Date. Loans made pursuant to the Revolving Credit Facility shall be repaid in full on such date, and all letters of credit issued under the Revolving Credit Facility shall terminate (or be cash collateralized or backstopped to the satisfaction of each letter of credit issuer) prior to such date. Use of Proceeds Proceeds of the Term Loan Facility shall be used to pay off the existingDeutsche Bank credit facility. Proceeds of the Revolving Credit Facility shallbe used for the borrower's working capital requirements and other generalcorporate purposes. Security All the obligations under the loan facilities will be unconditionally guaranteedby the subsidiaries of BSG North America and will be secured against all of theassets of BSG North America and its subsidiaries. Interest Rates The Facilities shall be subject to interest rates which are usual and customaryfor financings of this kind. Unused Commitment Fees Commencing on the Closing Date, a non-refundable fee in the amount of 0.50 percent. per annum will accrue on the daily average unused portion of the RevolvingCredit Facility commitments (whether or not then available), payable quarterlyin arrears and on the final maturity of the Revolving Credit Facility. Voluntary Prepayment BSG North America may, upon at least one business day's notice in the case ofBase Rate loans and three business days' notice in the case of Eurodollar loans,prepay, in full or in part, the Facilities without premium or penalty; providedthat each partial prepayment of the Term Loan Facility shall be in an amount of$1 million or an integral multiple of $500,000 in excess thereof; providedfurther that any such prepayment of Eurodollar loans shall be made together withreimbursement for any funding losses of the Lenders resulting therefrom. Mandatory Prepayment and Commitment Reduction Mandatory prepayment shall occur on receipt by the Continuing Group of (i) 70per cent. of excess cash flow, (ii) 100 per cent. of proceeds in excess of $2million in the aggregate from permitted, non-ordinary course asset sales in eachfiscal year (including, without limitation, casualty, insurance and condemnationproceeds subject to a 100 per cent. reinvestment right if such proceeds of suchcasualty, insurance or condemnation are reinvested within 6 months of receiptand (iii) 100 per cent. of proceeds from the sale or issuance of debt securities(subject to certain exceptions), in each case applied to the remainingamortization payments of term loans (including the final installment thereof)(in direct order for payments due in the subsequent 12 months and then prorata), then to the repayment of the outstanding principal amount under theRevolving Credit Facility, without any reduction in the revolving loancommitments. Representations and Warranties The loan documentation will contain representations and warranties (with respectto any guarantor, including BSG North America and its respective subsidiaries)as are usual and customary for financings of this kind. Covenants The loan documentation shall contain affirmative, negative and financialcovenants (applicable to BSG North America and any guarantor, including BSGNorth America's subsidiaries) as are usual and customary for financings of thiskind (including customary exceptions and baskets). Events of Default The Facilities will include such events of default as are usual and customaryfor financings of this kind (including customary grace and cure periods). Conditions Precedent to Closing The provision of the Facilities to the Continuing Group is conditional, interalia, upon the review and reasonable satisfaction of MSSF of all documentation,approval by the Lenders of the loan documentation, the Company obtaining allgovernmental and third party consents, due diligence as to the corporate andlegal structure of the Continuing Group, the solvency of each guarantor, thereceipt by MSSF of customary closing documents, payment of fees and satisfactionof no other indebtedness. "AIM" a market of that name operated by the London Stock Exchange; "AIM Admission the date of the admission of the Common Shares to AIM, being 15Date" June 2005; "AIM Rules" the AIM Rules for Companies of the London Stock Exchange governing admission to and operation of AIM; "BCIA" BCI Acquisition, LLC, which was renamed BSG Clearing Solutions North America, LLC on 19 December 2005; "Board" or the directors of BSG;"Directors" "BSG" or Billing Services Group Limited;"Company" "BSG Asia" BSG Clearing Solutions Asia Limited; "BSG Group" BSG and its subsidiaries and subsidiary undertakings prior to Completion; "BSG Billing Services Group Luxembourg Sarl;Luxembourg" "BSG North Billing Services Group North America, Inc. (having changed itsAmerica" name from Thurston Communications Corporation on 19 December 2005); "BSG Holders of BSG Common Shares and "Shareholders" shall bear theShareholders" same meaning; "CAGR" compound annual growth rate; "Common common shares of $1.00 each (or in the case of uncertificatedShares" common shares of $1.00 each, Depositary Interests) in the capital of the Company; "Companies Act" the Companies Act 1981, as amended, of Bermuda; "Company's Capita Registrars whose registered office is The Registry, 34Registrars" Beckenham Road, Beckenham, Kent, BR3 4TU; "Completion" completion of the Disposal and the Refinancing; "Continuing BSG and its subsidiaries and subsidiary undertakings other thanGroup" BSG Luxembourg (and its subsidiaries) and BSG Asia; "CREST" the relevant system (as defined in the Uncertificated Securities Regulations 2001) in respect of which CRESTCo Limited is the Operator (as defined in such regulations); "Deutsche Deutsche Bank AG New York Branch;Bank" "Disposal" the proposed disposal of BSG Luxembourg and BSG Asia by the Company pursuant to the Disposal Agreement; "Disposal the share purchase agreement between BSG, the Purchaser andAgreement" Syniverse dated 1 April 2007 relating to the Disposal; "EBITDA" earnings before interest, taxes, depreciation and amortization; "EDS IOS" EDS Interoperator Services GmbH (which was merged into BSG Germany on 25 August 2005); "LEC" local exchange carrier; "London Stock London Stock Exchange plc;Exchange" "Purchaser" Highwoods Corporation, a subsidiary of Syniverse; "Refinancing" the provision of financing to the Continuing Group by Morgan Stanley Funding for $105 million; "Shareholders" BSG Shareholders (and "Shareholder" shall be construed accordingly); "Syniverse" Syniverse Technologies, Inc.; "United Kingdom" the United Kingdom of Great Britain and Northern Ireland; or "UK" "United States" the United States of America, its territories and possessions,or "US" any state of the United States of America and the District of Columbia and all other areas subject to its jurisdiction; "US Regulation Regulation D promulgated by the US SEC under the US SecuritiesD" Act, including the preliminary notes thereto; "US Regulation Regulation S promulgated by the US SEC under the US SecuritiesS" Act, including the preliminary notes thereto; "US SEC" "US the United States Securities and Exchange Commission; theSecurities United States Securities Act of 1933, as amended;Act" "VoiceLog" VoiceLog, LLC "Wireless the business conducted by BSG Asia, BSG Luxembourg and theBusiness" subsidiaries of BSG Luxembourg; "Wireline the business conducted by BSG North America and itsBusiness" subsidiaries. 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