Looks like CEO Spencer Brown was right—Dial Global has restructured its debt with lenders, meeting its 2/28 debt covenant and fending off bankruptcy. Brown had told RBR-TVBR: “We are deep into negotiations and conversations with our banks and sponsors. Our banks are both first lien and second lien lenders. It’s really just a matter of whether they can and will negotiate amongst themselves. From where I sit—and granted it’s my perspective—there is zero chance of us either not getting a deal or a financing done—or at least a further extension.”
Dial Global announced the good news 3/4–its lenders and some stockholders have agreed to recapitalize the company’s existing credit facilities, other obligations and equity interests.
Brown tells RBR-TVBR what the plans are moving forward: “Our plan is to get Dial Global back to its traditional posture of growing revenues by providing great service to our clients. We are very excited about our new offerings in digital and the NBC Sports Radio Network. We also hope to unveil some other new initiatives in the upcoming weeks. We worked very closely with our investors to create a structure that would put us on solid financial footing moving forward.”
As part of the recapitalization, DG entered into an amended credit agreement with General Electric Capital as administrative agent and collateral agent, and the lenders from DG’s first lien credit agreement, which provides for a $15 million paydown of the company’s existing term loan and revolving credit commitments. The maturity date under the First Lien Credit Agreement is 10/21/16.
DG also entered into a Priority Second Lien Credit Agreement with the administrative agent, the syndication agent and the lender party thereto, pursuant to which the lender agreed to invest an additional $31.5 million through a term loan facility to the company, with a maturity date of 7/21/17. In connection with such lender’s agreement to extend credit under the Priority Second Lien Credit Agreement, DG agreed to issue it penny warrants to purchase 7.5% DG’s common stock exercisable immediately following the consummation of the recapitalization.
These lenders include Oaktree and Gores Group for the first lien; Macquarie and Black Rock for the second lien.
The second lien lenders under the agreement dated 10/21/11 agreed, subject to the satisfaction of specified conditions, to restructure their existing $93 million in obligations by amending and restating the Second Lien Credit Agreement to provide for a $30 million term loan that matures five years after the expected closing of the recapitalization and exchanging $63 million in remaining obligations under the existing Second Lien Credit Agreement for a new series of preferred DG stock.
As part of these agreements, these holders of preferred stock will be granted certain corporate governance rights. The Company also agreed to issue the second lien lenders for nominal consideration warrants to purchase 12.0% of DG’s common stock in connection with the exchange of a portion of the existing second lien obligations for preferred stock, which warrants will be exercisable at various dates after the recapitalization if DG does not retire the $30 million second lien term loan and the preferred stock held by second lien lenders prior to the specified dates.
Under various subscription and exchange agreements between the company and the holders of the Company’s PIK Notes and Series A Preferred Stock, such holders have agreed to exchange their PIK Notes and Series A Preferred Stock for equity securities of the Company and have further agreed to make an additional equity infusion of $16.5 million.
The recapitalization is expected to become effective on or around 4/16/13.
Brown adds, “The new agreements with our lenders represent a significant step forward for the Company. Once these transactions close, we will have delivered our balance sheet and decreased cash interest expense. The agreements will provide us with greater flexibility to actively manage and grow our business. We look forward to closing these transactions in April and focusing on serving our clients.”
RBR-TVBR observation: This reminds us of some of the banks that had been bailed out during the financial crisis: too big to fail. To the lenders involved here, this is not a major cash outlay in the overall spectrum of businesses they are involved in. If they had not worked together and stepped up to the plate, they would have lost most, if not all, of what they’ve already put in. It’s not like there were a lot of assets on the table they would be able to recoup from a bankruptcy. This is good news for the industry and for the 400 employees of Dial Global.