Iron Mountain going back to roots in storage services

Posted on Apr 27, 2011 in Records Management News

Iron Moun­tain going back to roots in stor­age ser­vices
Com­pany changes direc­tion, con­sid­ers sell­ing off dig­i­tal busi­ness
By Lucas Mear­ian
April 27, 2011 06:00 AM ET

Com­put­er­world — A week after Iron Moun­tain announced it had replaced its CEO, the com­pany said it’s con­sid­er­ing sell­ing its archiv­ing, e-discovery and online backup and recov­ery busi­ness to return to its roots in doc­u­ment and tape stor­age services.

“There’s no guar­an­tee a deal will get done because we’re still early in the process, but we have good inter­est. And as you can imag­ine these processes take a mat­ter of a few months, before we know it will unwind itself,” said Richard Reese, who abruptly took over as CEO on April 14.

Why hackers and spooks want our heads in the cloud

Posted on Apr 26, 2011 in Records Management News

by John Har­ris, Guardian, guardian.co.uk, Mon­day 25 April 2011 20.00 BST

Our unthink­ing embrace of these giant data cen­tres is throt­tling the giddy anti-authoritarian com­put­ing dream

Imag­ine this. A noto­ri­ous multi­na­tional is on the look­out for new busi­ness. For the sake of argu­ment, let’s imag­ine it’s Lock­heed Mar­tin, the defence, secu­rity, and “advanced tech­nol­ogy” cor­po­ra­tion that has lately been see­ing to the cen­sus. From some­where in their R&D divi­sion comes an idea: “per­sonal lifestyle secu­rity ser­vices” for mil­lions across the planet. The wheeze is sim­ple enough: sign up and hand them your per­sonal cor­re­spon­dence, finan­cial records, bank details, ID doc­u­ments, and more. They’ll have all your stuff, and you’ll have a unique pass­word when­ever you want a look. And just think: more clut­ter shunted out of your life, leav­ing you to glide through the min­i­mal­ist bliss of 21st cen­tury living.

Defogging the Cloud: Applying Fourth Amendment Principles to Evolving Privacy Expectations in Cloud Computing

Posted on Apr 22, 2011 in Records Management News

by David A. Couil­lard
93 Minn. L. Rev. 2205 (2009)

It took nearly a cen­tury after the inven­tion of the tele­phone for the Supreme Court to rec­og­nize that the Fourth Amend­ment could be applied to the con­tent of pri­vate tele­phone con­ver­sa­tions. Today, the Inter­net is in a sim­i­lar state of limbo, with courts reluc­tant to grant Fourth Amend­ment pro­tec­tion to data placed in a medium that has been per­ceived as inher­ently pub­lic in nature. This per­cep­tion has begun to shift as Inter­net tech­nol­ogy becomes faster, more wide­spread, and more mobile. “Cloud com­put­ing” is the trendy phrase used to describe this change. Rather than merely a medium of mass com­mu­ni­ca­tion, the ethe­real Inter­net “cloud” is now used as a vir­tual plat­form for stor­ing and inter­act­ing with data that are intended to remain pri­vate yet acces­si­ble any­where. Although some courts have recently rec­og­nized lim­ited pro­tec­tion for e-mails and text mes­sages, these nar­row hold­ings are not uni­ver­sal. The third-party doc­trine fur­ther com­pli­cates the issue when con­tent and quasi-transactional data are being stored by cloud ser­vice providers.

Iron Mountain Calms Bondholders on $2.2 Billion Payout: Corporate Finance

Posted on Apr 21, 2011 in Records Management News

By Sapna Mahesh­wari and Danielle Kucera — Apr 20, 2011 11:00 PM CT

Iron Moun­tain Inc. (IRM), the doc­u­ment– stor­age com­pany that was pres­sured by Elliott Man­age­ment Corp. to change its strat­egy, is per­suad­ing the bond mar­ket it can reward share­hold­ers with­out harm­ing its creditworthiness.

The company’s $300 mil­lion of 8 per­cent notes due June 2020 rose for the first time in six days yes­ter­day, gain­ing 0.25 cent to 103.5 cents on the dol­lar, accord­ing to Trace, the bond-price report­ing sys­tem of the Finan­cial Indus­try Reg­u­la­tory Authority.

Iron Moun­tain Chief Exec­u­tive Offi­cer Richard Reese assured debt investors yes­ter­day the Boston-based company’s lever­age would face no more than a “slight increase” as it returns $2.2 bil­lion to share­hold­ers through 2013. Last month, hedge fund Elliott Man­age­ment called for a review of Iron Moun­tain, cit­ing a loss of share­holder value from parts of its inter­na­tional and dig­i­tal businesses.

“The sources of the funds are com­ing, by and large, from oper­a­tions, free cash flow, as well as from a slight increase in our lever­age,” Reese, 65, who led the com­pany between 1981 and 2008 and resumed that role last week, said in a con­fer­ence call. “I want to be real clear to the debt mar­kets who might be lis­ten­ing, or hope­fully are lis­ten­ing, we’re talk­ing about going from a lit­tle under 3 times lever­aged to 3.5.”
12-Month Return

The return to share­hold­ers in the next 12 months will be $1.2 bil­lion, includ­ing “poten­tial one-time div­i­dends,” in addi­tion to quar­terly dis­tri­b­u­tions and share buy­backs, Iron Moun­tain said in a state­ment on April 19.

The 8 per­cent notes fell to 103.25 cents on the dol­lar that day to yield 7.46 per­cent, Trace data show. The debt traded at 107.6 cents with a 6.92 per­cent yield on March 2, Trace data show.

The aver­age B rated secu­rity yields 7.38 per­cent, accord­ing to Bank of Amer­ica Mer­rill Lynch index data. The senior sub­or­di­nated notes from Iron Moun­tain are graded B1 by Moody’s Investors Ser­vice and B+ by Stan­dard & Poor’s, accord­ing to data com­piled by Bloomberg.

Investors were con­cerned the com­pany might take on more debt to make pay­outs to fend off pres­sure from share­hold­ers, said Sabur Moini, a money man­ager who over­sees more than $2 bil­lion of high-yield debt at Los Angeles-based Pay­den & Rygel, includ­ing bonds from Iron Moun­tain.
‘Not Bondholder-Friendly’

“When­ever news like this comes out, it’s bad for the bonds because the expec­ta­tion is that the com­pany to save itself will have to do some­thing that’s not bondholder-friendly,” Moini said. “It prob­a­bly makes sense to take in more infor­ma­tion and not be one of the first to sell at a low print,” he said on April 19.

Iron Moun­tain ini­tially adopted a so-called poison-pill pro­vi­sion, meant to keep dis­si­dent investors from gain­ing con­trol of it. Last week, Bob Bren­nan resigned as CEO, and the com­pany said in an April 19 state­ment it plans to sell parts of its dig­i­tal unit and return cash to shareholders.

Iron Moun­tain also said it’s set­ting up a com­mit­tee to explore con­ver­sion into a real estate invest­ment trust as part of an agree­ment with Elliott Man­age­ment. REITs must pass on at least 90 per­cent of their annual tax­able profit to share­hold­ers through dividends.

New York-based Elliott Man­age­ment, run by Paul Singer, has said it owns “slightly under” 5 per­cent of Iron Mountain’s stock.

As part of its agree­ment with Elliott Man­age­ment, Iron Moun­tain also agreed to nom­i­nate Allan Loren, one of the company’s four can­di­dates, to its board at the 2011 annual meet­ing, sched­uled for June 10. Elliott Man­age­ment agreed to with­draw its other nom­i­nees at the event, Iron Moun­tain said.
Under­ground Facility

Iron Moun­tain, founded in an under­ground facil­ity near Hud­son, New York, in 1951, stores and main­tains mate­ri­als for clients, includ­ing records, elec­tronic files, med­ical data and e-mail, accord­ing to its most recent annual report. It works with more than 150,000 cor­po­ra­tions in North Amer­ica, Europe, Latin Amer­ica and Asia Pacific.

The com­pany, which had $2.9 bil­lion of long-term debt as of Dec. 31, went pub­lic in 1996 and joined the S&P 500 Index (SPX) in Jan­u­ary 2009, accord­ing to the filing.

Iron Mountain’s $548 mil­lion of 8.375 per­cent bonds matur­ing in August 2021 also rose yes­ter­day after falling since April 14, Trace data show. The debt climbed 1.5 cents to 106 cents on the dol­lar to yield 7.5 per­cent, the data show.

Before yesterday’s call, S&P, which assigns Iron Moun­tain a BB– grade, changed its out­look on the com­pany to “neg­a­tive” from “sta­ble,” accord­ing to an April 19 note.
‘Finan­cial Risk’

“We expect the com­pany will have to raise new debt and draw under its revolv­ing credit facil­ity to finance the entire planned $2.2 bil­lion,” S&P ana­lysts Tulip Lim and Andy Liu wrote in the note. “The trans­ac­tion will raise finan­cial risk amid uncer­tainty as to financ­ing terms.”

The pay­outs could increase the company’s debt to earn­ings before inter­est, taxes, depre­ci­a­tion and amor­ti­za­tion to more than five times from the “low” four times area now, the ana­lysts wrote. A debt to EBITDA ratio above 5.5 times would spur a down­grade, they wrote.

“More lever­age makes bond­hold­ers increas­ingly uncom­fort­able,” said Andrew Wittmann, an ana­lyst at Robert W. Baird & Co. in Milwaukee.

The company’s tar­get lever­age of 3.5 times looks “about right,” said Wittman, who has a “neu­tral” rat­ing on the stock. “Share­hold­ers feel very com­fort­able there, and I feel like bond­hold­ers should feel pretty com­fort­able as well,” he said.
Credit Swaps

Credit-default swaps on Iron Mountain’s sub­or­di­nated bonds fell after soar­ing on April 19 to the high­est since Sep­tem­ber, accord­ing to data provider CMA. The con­tracts, which typ­i­cally rise as investor con­fi­dence wors­ens and fall as it improves, fell 7 basis points to 418.9 yes­ter­day, CMA data show.

Default swaps pay the buyer face value if a bor­rower fails to meet its oblig­a­tions, less the value of the defaulted debt. A basis point equals $1,000 annu­ally on a con­tract pro­tect­ing $10 mil­lion of debt.

“Some could even argue we’re under-levered,” Reese said on the con­fer­ence call. “We think we’re appro­pri­ately lev­ered at this space, given where the busi­ness is and given the amount of cap­i­tal we’re talk­ing about and we think this is the right thing to do. But this is not com­ing from a big lever­age up for the busi­ness at this stage.”

To con­tact the reporters respon­si­ble for this story: Sapna Mahesh­wari in New York at sapnam@bloomberg.net; Danielle Kucera in New York at wkoenig@bloomberg.net

To con­tact the edi­tors respon­si­ble for this story: Alan Gold­stein at agoldstein5@bloomberg.net Tom Giles at tgiles@bloomberg.net

Com­pli­ments of File­Man Research

Iron Mountain to Return Cash, May Sell Digital Assets

Posted on Apr 20, 2011 in Records Management News

Iron Moun­tain to Return Cash, May Sell Dig­i­tal Assets
By Danielle Kucera — Apr 20, 2011 9:45 AM CT

(Cor­rects story that ran April 19 to show Iron Moun­tain is con­sid­er­ing sell­ing only parts of its dig­i­tal business.)

Iron Moun­tain Inc. (IRM), the world’s largest doc­u­ment stor­age com­pany, said it will return cash to share­hold­ers and may sell parts of its dig­i­tal unit after pres­sure from hedge fund investor Elliott Man­age­ment Corp.

Iron Moun­tain also agreed to con­sider con­vert­ing to a real estate invest­ment trust, a move that Elliott encour­aged, Iron Moun­tain said in a state­ment today. One of Elliott’s nom­i­nees will join the Iron Moun­tain board, staving off a proxy fight in which the fund man­ager run by Paul Singer had sought four seats.

The New York-based hedge fund, which owns less than 5 per­cent of Iron Moun­tain, called for a review of the stor­age company’s strat­egy, oper­a­tions and cap­i­tal in a state­ment March 10, say­ing the company’s stock could more than dou­ble to $77 a share if it con­verted to a REIT and imple­mented its other proposals.

“Investors should be pleas­antly sur­prised that the return of cap­i­tal is quite sig­nif­i­cant,” said Andrew Wittmann, an ana­lyst at Robert W. Baird & Co. in Mil­wau­kee, who is neu­tral on the stock. “The 12-month plan is pretty aggres­sive, so they’re going to have to start pretty soon.”

The document-storage com­pany plans to return about $1.2 bil­lion to share­hold­ers dur­ing the next 12 months through stock repur­chases and div­i­dends and dis­trib­ute about $2.2 bil­lion through 2013, accord­ing to the state­ment. Iron Moun­tain took most of Elliott’s sug­ges­tions, Wittmann said.
Dig­i­tal Business

Iron Moun­tain, based in Boston, pro­vides busi­ness stor­age and main­tains doc­u­ments includ­ing records, elec­tronic files, med­ical data and e-mail. Iron Mountain’s effort to expand its inter­na­tional and dig­i­tal busi­nesses hasn’t been prof­itable enough, Elliott said in March.

Iron Moun­tain rose $1, or 3 per­cent, to $34.90 as of 4:15 p.m. in New York Stock Exchange com­pos­ite trad­ing. It has risen 33 per­cent since March 9, the day before Elliott called for a strate­gic review of the company.

“We strongly sup­port the board of direc­tors’ plan to increase stock­holder value with the actions announced today,” Ken Charles Fein­berg, co-portfolio man­ager at New York-based Davis Selected Advis­ers LLP, Iron Mountain’s largest investor as of March with a 21 per­cent share, said in the state­ment.
‘Strate­gic Alternatives’

Iron Mountain’s man­age­ment “con­cluded that the com­pany could not con­tinue invest­ing in tech­nol­ogy devel­op­ment and meet its return require­ments and that explor­ing strate­gic alter­na­tives for the dig­i­tal busi­ness was in the best inter­est of Iron Mountain’s stock­hold­ers,” accord­ing to the doc­u­ment– stor­age company’s state­ment. Options include a poten­tial sale of the company’s dig­i­tal archiv­ing and online backup services.

Less than two weeks after Elliott’s pro­posal, Iron Moun­tain adopted a so-called poison-pill pro­vi­sion, meant to keep investors from gain­ing con­trol of the com­pany. The share­holder– rights plan was a reac­tion to “extra­or­di­nary trad­ing activ­ity” in the company’s secu­ri­ties, said Stephen Golden, vice pres­i­dent of investor rela­tions at Iron Mountain.

Last week, Iron Moun­tain Chair­man Richard Reese took on the chief exec­u­tive offi­cer role after Bob Bren­nan stepped down as pres­i­dent and CEO.

As part of its pact with Elliott, Iron Moun­tain today agreed to nom­i­nate Allan Loren, one of Elliott’s can­di­dates, to its board of direc­tors at the 2011 annual meet­ing, sched­uled for June 10. Elliott agreed to with­draw its other nom­i­nees for the board at the event, Iron Moun­tain said.

Con­stan­tin R. Boden, a board mem­ber for more than 20 years, is retir­ing, accord­ing to the state­ment. The com­pany will work in tan­dem with Elliott and Davis Selected Advis­ers to fill the posi­tion with an inde­pen­dent can­di­date, Iron Moun­tain said.

Iron Mountain’s board plans to form a com­mit­tee, chaired by Reese, to eval­u­ate ways to max­i­mize value through alter­na­tive financ­ing, cap­i­tal and tax strate­gies and will make the analy­sis of a REIT con­ver­sion “first pri­or­ity,” the com­pany said.

J.P. Mor­gan Chase & Co. and Mor­gan Stan­ley (MS) are serv­ing as finan­cial advis­ers for Iron Moun­tain, and Weil, Got­shal & Manges LLP and Sul­li­van & Worces­ter LLP are serv­ing as legal advis­ers. Paul, Weiss, Rifkind, Whar­ton & Gar­ri­son LLP is the legal adviser to Elliott.

To con­tact the reporter respon­si­ble for this story: Danielle Kucera at dkucera6@bloomberg.net

To con­tact the edi­tor respon­si­ble for this story: Tom Giles at tgiles5@bloomberg.net

Com­pli­ments of File­Man Research

Iron Mountain Inc Re-appoints Chairman Richard Reese as CEO

Posted on Apr 15, 2011 in Records Management News

UPDATE 3-Reese returns as Iron Moun­tain CEO; top share­holder lauds move
Iron Moun­tain Inc Re-appoints Chair­man Richard Reese as CEO
Thu Apr 14, 2011 4:13pm EDT

Bob Bren­nan steps down as CEO, resigns as direc­tor Davis Advi­sors expects co to exit dig­i­tal business

Shares up 5 pct at 3-yr high (Adds response from largest share­holder; com­pany background)

By Himank Sharma

BANGALORE, April 14 (Reuters) — Iron Moun­tain Inc’s move to bring back its chief exec­u­tive of three decades will likely help the doc­u­ment stor­age com­pany change its loss-making dig­i­tal busi­ness strat­egy, its largest share­holder said.

Tuscon-Arizona based money man­ager Davis Advis­ers, which holds over 21 per­cent of Iron Moun­tain, said the company’s board had con­sulted it before bring­ing back Richard Reese, fol­low­ing share­holder dis­sent over the company’s oper­a­tional spending.

“I’ve met Richard sev­eral times. They have taken a lot of feed­back, and the direc­tors have reached out to our pro­posal,” Ken Charles Fein­berg, co-portfolio man­ager of Davis Advis­ers told Reuters.

Last month, Davis had said it will sup­port hedge fund Elliott Management’s pro­posal to nom­i­nate a slate of four direc­tors to the company’s board. [ID:nL3E7EN31K]

Reese, 65, who has been the chair­man of the board since 1995, replaces Robert Bren­nan, who also resigned as a direc­tor of the company.

Investors cheered the appoint­ment of Reese, who was instru­men­tal in mak­ing Iron Moun­tain a dom­i­nant player in North Amer­i­can phys­i­cal stor­age. Under his lead­er­ship, the com­pany went pub­lic in 1996 and acquired local rivals later.

Iron Moun­tain shares rose 5 per­cent to a three-year high of $34.59 on Thurs­day on the New York Stock Exchange.

Iron Moun­tain began its dig­i­tal records busi­ness at the height of the dot-com boom, hop­ing to get busi­ness from large cor­po­ra­tions look­ing to store their email and instant mes­sage con­ver­sa­tions for future retrievals.

“The foray into dig­i­tal was a fail­ure, they invested $600–700 mil­lion to grow that busi­ness and they were barely earn­ing any money. In order to have a fresh set of eyes, the change was needed to be made,” Fein­berg said.

The com­pany had writ­ten off $283.8 mil­lion as impair­ment charges in fis­cal 2010 for its world­wide dig­i­tal busi­ness due to the sale of the domain name man­age­ment prod­uct line, accord­ing to its lat­est annual filing.

“The board was not hun­dred per­cent pleased with company’s response to the Elliott pro­posal and Reese will be a strong leader,” ana­lyst Edward Atorino at the Bench­mark Co said. (Report­ing by Himank Sharma and Rachana Khan­zode in Ban­ga­lore; Edit­ing by Prem Udayab­hanu, Vyas Mohan)

http://www.reuters.com/article/2011/04/14/ironmountain-idUSL3E7FE20520110414

Com­pli­ments of FileMan