Bank of America has notified Regent Communications that it is in technical default of its loan agreement, which could make the entire loan due in 30 days. Meanwhile, Regent is negotiating with its lenders on an amendment to its credit agreement.
In an SEC filing, Regent noted that it had been in full compliance with the financial ratio covenants of its credit agreement as of the end of 2008. However, the company anticipate that it might not be able to comply with those covenants through all of 2009. As a result, Regent’s independent auditors included a notation of doubts about the company’s ability to continue as a going concern in connection with the annual audit letter filed with Regent’s annual financial statements.
Under the terms of the credit with the lender group, headed by BofA, such a “going concern” note constitutes a default. So, BofA has now notified Regent that no additional borrowing is permitted and it has 30 days – the letter of notice was dated April 1 – to cure the default. Otherwise, the bank group has reserved all of its rights, which could lead to a demand for repayment of the entire amount outstanding under the credit agreement. As of March 31, Regent said, that was $195,139,000.
“Also as previously disclosed, the Company is currently in negotiations with BofA and the other parties to the Credit Agreement to amend certain of the financial ratios and other covenants contained in the Credit Agreement in order to regain compliance. The Company cannot guarantee that it will be able to negotiate an amendment to the Credit Agreement. If the Company is unable to negotiate such an amendment, the lenders and secured parties to the Credit Agreement could accelerate the full amount of the outstanding debt to currently payable, charge the default rate of interest until such debt would be repaid, and proceed against available collateral pledged pursuant to the terms of the Credit Agreement and related Loan Documents. If the Company is able to negotiate an amendment to the Credit Agreement, such an amendment could contain terms unfavorable to the Company and could result in the imposition of additional finance fees and higher interest charges. Such charges could have a material effect on the Company’s future cash flows, results of operations or financial condition,” Regent said in its SEC filing.
Regent CEO Bill Stakelin recently reported that the company outperformed its peers in 2008, with revenues down only 1.6%. But he noted that Q1 was pacing down mid-teens after Q4 finished with a decline of 5%.
More recently, the company reached a settlement with its largest shareholder, the Riley Investment Management hedge fund, which avoided a proxy fight for control of Regent’s board of directors.
RBR/TVBR observation: As we’ve noted before, banks do not want to own radio stations. Nonetheless, bankers can be expected to enforce the terms of their loans and require new concessions when covenants are violated.
