A Senior Notes Offering Moves Ahead At CBS


With CBS Radio expected to shift from CBS Corp. to Entercom on Friday (11/17), the top brass at Black Rock have unveiled plans to offer senior notes in a private debt offering.

CBS will use the net proceeds from the offering for “general corporate purposes,” which may include “redemption of long-term indebtedness, discretionary contributions to CBS qualified pension plans, or the repayment of short-term borrowings, including commercial paper.”

In an afternoon release outlining the offering, CBS announced the pricing of its private debt offering of $400 million of 2.900% senior notes due 2023 and $500 million of 3.700% senior notes due 2028.

The sale of the notes is expected to close on Thursday, subject to customary closing conditions.

After deducting fees and expenses related to this offering, CBS immediately used the net proceeds to redeem all of the Company’s $500 million outstanding aggregate principal amount of 5.75% senior notes due April 15, 2020. The remaining net proceeds will be used for general corporate purposes, which may include, among other purposes, discretionary contributions to CBS qualified pension plans or the repayment of short-term borrowings, including commercial paper. The redemption date is Nov. 30, 2017.

The notes were offered and sold in a private placement to qualified institutional buyers in the U.S. pursuant to Rule 144A under the Securities Act of 1933, and to non-U.S. persons in transactions outside the U.S. pursuant to Regulation S under the Securities Act.

The notes to be offered have not been registered under the Securities Act and may not be offered or sold in the U.S. absent registration or an applicable exemption from the registration requirements of the Securities Act.

The debt offering comes after Moody’s Investors Service last week assigned CBS Radio Inc.‘s proposed $250 million revolving credit facility a Ba3 rating.

The Ba3 rating of the upsized term loan B-1 and B1 Corporate Family Rating (CFR) are unchanged, and the outlook remains stable.

CBS Radio Inc. is the entity merging with Entercom, using the Reverse Morris Trust acquisition method to avoid a hefty Federal tax bill.

Moody’s notes that the term loan B-1 due 2024 is expected to be upsized by $830 million to $1,330 million from $500 million. The proceeds of the upsized term loan B-1 and a draw of $100 million from the new revolver are expected to fund the repayment of the existing term loan B due 2023 and repay the outstanding balance on the prior revolving credit facility. The transaction extends the maturity date of the credit facility and leads to additional interest expense savings.

The transaction is expected to close Friday, following the merger between CBS Radio and Entercom, with Entercom being the surviving entity.

CBS shareholders are expected to own 72% of the combined entity, with Entercom shareholders owning a 28% position.

The debt issued at CBS Radio, including the new revolver, term loan B-1 and $400 million of senior notes will remain outstanding as the change of control provision will not be triggered by the transaction. The debt will be issued by CBS Radio and be secured by the assets of both companies. Shortly after the closing of the transaction, Moody’s will withdraw all the ratings at CBS Radio and assign the debt ratings under Entercom (B1 CFR; stable).

The merger, Moody’s notes, “will create a substantially larger company with pro-forma LTM revenue of $1.6 billion as of Q3 2017 with 235 stations. The greater scale of the combined company is expected to increase its competitive position and heighten demand from local and national advertisers.”

However, while Entercom’s management team “has a good track record of performance and integrating acquisitions,” Moody’s cautions that the merger with a much larger company “elevates integration risk which may delay the cost and revenue benefits of the transaction.”

In other news pertaining to CBS Radio, advertising software technology firm Strata has integrated CBS Radio into its software — just five days after CBS Radio’s stations are merged with those of Entercom.

The partnership opens the stream of 117 CBS Radio stations and CBS Sports Radio “to thousands of advertising agencies utilizing Strata’s systems.”

Strata allows buyers to secure guaranteed impression on CBS Radio stations and target by DMA, zip code, and device, including mobile, desktop, and tablet. Earlier digital audio announcements from Strata include partnerships with Pandora and iHeartRadio; there was no mention of Entercom by Strata.