Maglan Capital Delivers Letter to Consolidated Communications Board of Directors

April 3, 2018

Members of the Board of Directors
c/o C. Robert Udell Jr., Chief Executive Officer
Consolidated Communications Holdings, Inc.
121 South 17th Street
Mattoon, IL 61938

Dear Board Members:

We are writing to urge Consolidated Communications Holdings, Inc. ("Consolidated" or, the "Company") to authorize and commence a program to repurchase Company bonds on the open market. Moreover, we are writing to express our concern with the Board of Directors' (the "Board") and management's apparent apathy as it relates to the Company's share price, and its preference to preserve cash for the purpose of future acquisitions, in spite of the fact that the Company recently closed on its largest asset-purchase ever, and that another acquisition is likely far-off in the future and will necessarily utilize, in large-part, the Company's shares as consideration.

Maglan Capital LP ("Maglan") has been an investor in Consolidated since prior to its announced purchase of FairPoint Communications in 2017. Currently, Maglan controls approximately 1,555,000 shares of Consolidated.

The facts are clear: the Company's share-price has effectively not risen in 15 consecutive months. The current share price stands below $11, which reflects an eye-popping 14.65% yield, a 50%+ decline since the Company's  announced purchase of FairPoint Communications, and the lowest share price since 2009. Additionally, the Company's bonds have traded down from par to below 90 cents on-the-dollar.

Regardless of whatever progress there has been operationally at the Company, the Board and management must immediately begin a program to repurchase its bonds at a discount. Any thought that "over time, fundamentals will prevail," is naïve; by the time the fundamentals are undeniable, the Company's share price could easily be in single digits, and regaining lost ground would be impossible because of a percentage price-growth cap that investors will place on the upside to the stock price.

We have heard, on an inbound basis, from a chorus of shareholders who share our views.

Discounted Debt Repurchase

Certainly, you agree with us that the Company's debt should be priced at par (at least). Consolidated presents a very low credit risk profile and is expected to grow its cash flow between now and 2022, its nearest material debt maturity.

Currently, Consolidated has the opportunity to retire debt at a meaningful discount, and the Company has access to the necessary capital, through cash on-hand and through its undrawn revolver.  Consolidated's bonds are currently priced below 90 cents on-the-dollar, leading to a greater than 9.25% yield.  In contrast, the Company has relatively substantial cash on-hand and the Company's revolver has an effective rate of less than 4%.  In light of the Company's cash surplus and cost-of-capital, retiring debt at a discount is prudent from a corporate finance perspective.

In addition to the linear justification, the multiplier effect on the Company's share-price cannot be overstated.  With a buyback program, the Company will communicate a clear and bold message to the markets (debt and equity), and investment in the Company's stock would likely increase.  Moreover, short-sellers of the Company's stock will immediately be forced to rethink their investment thesis.  The short-interest in the Company's shares has increased from 5 million shares in June 2017 to over 11 million shares currently.

We expect that the bang-for-the-buck on the debt retirement will be overwhelming.  For a relatively small amount of capital that will be allocated to the bond buyback, the Company will see a substantial appreciation in its most important acquisition currency--its shares.  Although the Company only recently closed on its largest asset-purchase to date (by double) and, pursuant to the Company's historic cadence of asset-purchases, the Company would not be primed for another purchase until 2020 at the earliest.  If the Company found a compelling purchase opportunity, it would undoubtedly be required to heavily utilize its shares to complete any purchase, which further supports our suggested actions.

We feel strongly about the foregoing, and we are available at your convenience to discuss further. We appreciate the open-market stock purchases that have been made in recent months by the Company's executives and members of the Board.  We commend your show of confidence in the Company's shares to the market, but it is clearly not enough.

Sincerely,

Steven Azarbad
Co-Founder and Portfolio Manager

cc:
Robert J Currey
Maribeth S Rahe
Roger H Moore
Timothy D Taron
Thomas A Gerke
Richard Anthony Lumpkin
Dale E Parker
Wayne L Wilson

About Maglan Capital

Maglan Capital is an event-driven investment fund with a core focus on all parts of the distressed cycle, investing in liquid instruments across the capital structure of companies approaching or experiencing financial distress, bankruptcy or restructuring.

Maglan Capital has retained Olshan Frome Wolosky LLP as its legal and strategic advisor in connection with its investment and involvement at Consolidated. 

Investor Contact:

Steven Azarbad
Maglan Capital
[email protected]

SOURCE Maglan Capital LP