Beasley’s Stock Dip: Is Liquidity Question A Culprit?

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As the clock struck 4pm in New York, Beasley Broadcast Group shares were off 6% from Monday’s close, trading at $2.05.


That’s just the second time since April 9 that BBGI has traded so low, and it erases $1.81 in share value from Beasley’s June 19 closing price.

Why could investors be frowning on Beasley? An amendment to its credit terms with U.S. Bank resulting in slightly higher interest payments may be playing a role.

The same can be said of a loan from the company’s founder and Chairman bearing 6% interest.

According to a SEC filing, Beasley on June 30 revised its credit agreement with the lender, resulting in a 0.25% increase in its interest rate pertaining to term loans and revolving credit facility it has with U.S. Bank.

Additionally, 3% interest on the term loans will be payable on Dec. 31, 2021. And, should the credit agreement is not refinanced by the final day of 2022, an additional 1.5% in interest fees will be paid by Beasley.

The agreement with U.S. Bank also calls for Beasley to revise the “Excess Cash Flow” prepayment requirement, in the event its total leverage ratio should surpass 4.5x. If that were to happen, 75% of the excess cash flow must be prepaid — with amounts stepping down to 50%, 25% and 0% once leverage milestones are achieved.

Beasley acknowledges that this would “reduce the flexibility to incur certain additional indebtedness, liens and investments and make certain restricted payments, subject to the achievement of certain leverage based milestones.”

LIQUIDITY TEST

How much cash Beasley has on hand will also be under the microscope — and that may also be a shareholder concern.

A minimum liquidity covenant of $8.5 million, which will be tested every other week until the Total Leverage Ratio is less than 5.0x, is in place.

Furthermore, a minimum EBITDA covenant, which will be tested monthly beginning October 31, 2020 through June 30, 2021, is being implemented.

Then, there is a maximum First Lien Leverage Ratio covenant, which will be tested quarterly beginning with the fiscal quarter ending September 30. The amendment, Beasley explains, also modifies the definition of Consolidated EBITDA “to remove certain add-backs with respect to the calculation of Consolidated EBITDA and EBITDA for financial covenants and other similar calculations and reduces the amount of cash that can be netted for the calculation of the First Lien Leverage Ratio for purposes of testing the First Lien Leverage Ratio financial covenant, when applicable.”

FOUNDERS’ FUNDS

As as a condition to entering into the amendment, Beasley founder and Chairman George Beasley (pictured, at top) signed off on a $5 million loan to the company.

This will accrue payment-in-kind interest at an annual rate of 6%. But, no payments are due until the loan’s maturity in December 2023.

Beasley and GGB Family Limited Partnership will also each enter into standby letters of credit in combined aggregate face amount of $5 million in favor of U.S. Bank for the benefit of the company “as a source of backup liquidity” that may be drawn by U.S. Bank in the event that the company fails to maintain the minimum liquidity amount.

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