Vonage refinances debt; Off of deathwatch

Vonage isn't out of the liquidity woods yet, but on Friday the company took a big step in the right direction.

Vonage said in a statement Friday that it signed a letter of intent "with a third party financing source" to provide $215 million in private debt financing. The move allows the company to repay or redeem its convertible notes, which were going to be put back to Vonage on Dec. 16.

If the convertible bonds were put back to Vonage (all resources) it would have needed to come up with $253 million. The problem: Vonage only had $190 million in cash on hand.

The company said it would offer more details on its first quarter earnings conference call on May 8.

Citigroup analyst Michael Rollins upped his rating on Vonage from buy to hold on the news. He noted that while Vonage was "not out of the woods" it is a "step forward nevertheless."

What's unclear is how much this new financing will cost Vonage. It is doubtful that the financing will come cheap.