KeyTech Ltd. has announced a plan to reduce the company's debt and strengthen the capital structure.

The company has announced an offer to acquire all 7 percent redeemable notes of Bermuda Telephone Company Limited (a wholly owned subsidiary of KeyTech Ltd.) in exchange for 8 percent cumulative redeemable convertible preferred shares of KeyTech on the basis of three preferred shares for every two Bermuda Telephone Company notes. As will be detailed in a forthcoming Information Memorandum, which is expected to be distributed this month, the offer will comprise 2,613,445 KeyTech preferred shares offered in exchange for $26,134,450 in aggregate principal amount of the BTC Notes.

The exchange offer is conditional in its entirety on the approval of the KeyTech Common Shareholders which will be sought at the special general meeting to be held on September 12. The BTC Notes bear interest at the rate of 7 percent per annum, payable quarterly. The BTC Notes are due to mature on March 31, 2012, but the BTC has had the right, at its option, anytime since March 31 2002 to redeem the BTC notes early.

The KeyTech preferred shares will be preferred over KeyTech common shares as to dividends and return of capital. The KeyTech preferred shares will entitle the holder to a preferential dividend of 8 percent per annum, payable quarterly. They will be redeemable only at the option of KeyTech at a price equal to their initial issue price, namely $10, together with any accrued but unpaid dividend.

The Directors of KeyTech said they believe the exchange of the BTC notes for preferred shares and the resulting reduction of debt will further strengthen KeyTech's capital structure.