Otelco completes US$150 million initial public offering and secondary offering of income deposit securities and senior subordinated notes

On December 21, 2004, Alabama-based Otelco Inc. (Otelco), together with certain affiliates who were existing equity investors, completed an initial public offering and secondary offering of 8,659,000 income deposit securities (IDSs), and a concurrent separate public offering of US$8.5 million aggregate principal amount of senior subordinated notes. After the over-allotment option, granted by certain of the existing equity investors, was exercised on January 6, 2005 for an additional 672,513 IDSs, the total gross proceeds were US$150,338,997. Each IDS represented one share of Class A common stock of Otelco and US$7.50 principal amount of 13% senior subordinated notes of Otelco. This offering by Otelco was the second IDS offering in Canada, and is the first offering of IDSs in Canada consisting of an initial public offering by an issuer and a concurrent direct secondary offering by existing equity investors.

IDSs and the related Equity Income Securities belong to a class of securities called Equity Income Hybrid Securities, which are yield-oriented securities that represent shares of an individual company's common stock and debt paired together into a single unit for trading purposes. The IDS structure is designed to provide monthly distributions, similar to those provided by income funds, in the form of dividends on the common stock component of each IDS and interest on the note component of each IDS.

The IDS offering was underwritten by a syndicate led by CIBC World Markets, and included RBC Dominion Securities, UBS Securities, Deutsche Bank Securities, BMO Nesbitt Burns, KeyBanc Capital Markets, a division of McDonald Investments, and Raymond James. The concurrent separate offering of US$8.5 million aggregate principal amount of senior subordinated notes was underwritten by CIBC World Markets.