Radio One announced a multi-layered refinancing deal which will cover just about all of its existing debt and also allow the company to increase its equity stake in TV One, the cable channel it owns with Comcast and three private equity firms.
Radio One will be investing an additional $82 million in TV One, adding another 19% to its current stake of approximately 37%. The funds for that investment will come from the third of the three refinancing steps below, which Radio One announced Wednesday evening.
1) The execution of a commitment letter with certain affiliates of Deutsche Bank relating to a new senior secured credit facility comprised of a $50.0 million revolving facility and a $350.0 million term loan (the “New Senior Credit Facility”), the proceeds of which will be used to refinance all of the Company’s outstanding indebtedness under its existing senior credit facility. Pursuant to the commitment letter, affiliates of Deutsche Bank committed to provide the $50.0 million revolving facility and to use commercially reasonable efforts to syndicate the $350.0 million term loan.
2) The commencement of an exchange offer (the “Exchange Offer”) to exchange: (i) for each $1,000 principal amount of its outstanding 8 7/8% Senior Subordinated Notes due 2011 (the “2011 Notes”) $1,000 in principal amount of the Company’s newly issued 11.0%/12.0% Senior Grid Notes due 2017 (the “Exchange Notes”); and (ii) for each $1,000 principal amount of its outstanding 6 3/8% Senior Subordinated Notes due 2013 (the “2013 Notes” and together with the 2011 Notes, the “Existing Notes”) $900 in principal amount of the newly issued Exchange Notes and a concurrent consent solicitation to amend the indentures governing the Existing Notes to delete substantially all of the covenants contained therein.
3) A subscription offer to holders of Existing Notes who participate in the Exchange Offer providing the opportunity to subscribe to purchase an aggregate of $100.0 million in principal amount of the Company’s new 8.5%/9.0% Second-Priority Senior Secured Grid Notes due 2016 (the “Second Lien Notes”) (the “Subscription Offer” and together with the Exchange Offer, the “Offers”), the proceeds of which will primarily be used to fund the purchase of the additional equity interests in TV One (the “TV One Acquisition”) for an aggregate purchase price of approximately $82 million.
Radio One said it has entered into a Support and Backstop Agreement with certain holders of Existing Notes, who collectively represent approximately 80% of the aggregate principal amount of the outstanding Existing Notes, to ensure that they will subscribe to the exchange. There are also several conditions to the offers which have to be met for all of the transactions to be completed.
RBR-TVBR observation: Given the success of TV One, there was no doubt that Radio One CEO Alfred Liggins would want to take advantage of the company’s contractual right to increase its stake. The question was, how to do it. Fortunately, the financing markets have gotten a lot better than they were a year ago – so the question has been answered.