Dial Global has closed (4/16) on its previously announced recapitalization of the existing credit agreements, other obligations and equity interests with lenders and stockholders, meeting its 2/28/13 debt covenant and fending off bankruptcy. As part of the recapitalization, DG entered into an amended and restated credit agreement, with General Electric as administrative agent and collateral agent, and lenders from DG’s first lien credit agreement, which, after taking a $15 million paydown includes a term loan of $136 million and revolving credit commitments of $23 million, $18 million of which is drawn. The maturity date under the First Lien Credit Agreement is October 21, 2016.
DG also entered into a Priority Second Lien Credit Agreement with Cortland Capital Market Services as administrative agent and collateral agent, Blackrock Kelso Capital Corporation, as syndication agent and as the lender for an additional $31.5 million term loan facility, with a maturity date of July 21, 2017. DG issued to Blackrock penny warrants to purchase 7.5% of its common stock.
The lenders under DG’s Second Lien Credit Agreement, dated as of October 21, 2011 restructured their existing $93 million in second lien obligations by amending and restating the Second Lien Credit Agreement to provide for a $30 million term loan with a maturity date of April 16, 2018 and exchanging approximately $63 million in remaining obligations under the prior Second Lien Credit Agreement for a new Series A preferred stock of the Company.
The Company issued the Second Lien lenders penny warrants to purchase 12% of the Company’s common stock and 12% of the outstanding shares of Series B preferred stock, Series C preferred stock and Series D preferred stock.
The warrants and Series B preferred stock, Series C preferred stock and Series D preferred stock held by the 2L lenders will be subject to forfeit, in whole or in part, if DG retires all or a portion of the $30 million second lien term loan and the Series A preferred stock held by such 2L lenders prior to certain specified dates. As part of these agreements, these holders of preferred stock and warrants were granted certain corporate governance rights, including the right to elect three directors to the new eight-person Board of Directors. The three newly-elected directors are Brian Pope, Marshall Merriman and Ethan Underwood.
Former EVP, Chief Revenue Officer and Group President at Time Inc. Paul Caine also become DG’s new CEO and a member of the board 4/5. The appointment coincides with the resignation of DG CEO Spencer Brown and President Ken Williams.
Amd last, but not least, under various subscription and exchange agreements between DG and the holders of the company’s previously outstanding PIK Notes and Series A Preferred Stock, such holders exchanged their PIK Notes and Series A Preferred Stock for a new Series C and Series D preferred stock and purchased $16.5 million of a new Series B preferred stock. The terms of the Company’s new preferred stock are included in the Company’s Fifth Amended and Restated Certificate of Incorporation filed with the Delaware Secretary of State.
RBR-TVBR observation: Obviously, with the debt restructuring, the debt holders have decided to bring in Caine and other board members to run things their way. This is good news for the industry and for the 400 employees of Dial Global. Caine is not a radio guy, so we’re not sure what the mission might eventually be. For now it looks like a focus on monetizing the company’s content across additional media. Of course, he may look at selling off profit centers at the company to help assure the next round of covenants are met, too.