Emmis gets some financial breathing room


Emmis Communications is no longer racing toward a loan covenant brick wall on September 1st. It’s gotten consent from its lenders and amended its credit agreement.

“Today’s announcement provides Emmis with a significant opportunity to address our capital structure and gives us the flexibility we need going forward as our business continues to grow and gain momentum,” declared CEO Jeff Smulyan, pictured.

Emmis on march 29th signed a Third Amendment to its Amended and Restated Revolving Credit and Term Loan Agreement with a group of lenders, including Bank of America, N.A., as administrative agent, Deutsche Bank Trust Company Americas, as syndication agent, General Electric Capital Corporation, Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., “Rabobank Nederland”, New York Branch and SunTrust Bank, as co-documentation agents.
“Among other things, the Third Amendment provides that (i) the terms of the existing Tranche B Term Loans held or purchased on or prior to the date of the Third Amendment by funds or accounts managed  by Canyon Capital Advisors LLC (“Canyon”), are amended into an amended tranche of term loans with an extended maturity date of November, 2014 and pricing on such amended term loans is increased pursuant to a grid under which 7.5% to 12.25% per annum is to be paid in cash and 7.0% to 0.0% per annum is to be paid in kind, subject to a minimum yield of 12.25% per annum, (ii) the leverage ratio and fixed charge covenants will not apply under the Credit Agreement until November 30, 2012, at which time they will be set at 5.0x and 1.15x for the life of the Credit Agreement and from November 30, 2011 through August 31, 2012 there will be a minimum EBITDA test of $25 million per rolling 4 quarter test period, (iii) the requirement that annual audits be certified without qualification will be waived for the fiscal years ending February 2011 and 2012 and (iv) the ability of Emmis to engage in certain activities or transactions, including the payment of dividends, the incurrence of indebtedness and the ability to invest certain proceeds including from asset sales will be further restricted or prohibited. The total amount of Tranche B Term Loans outstanding as of March 29, 2011 is $329 million, and the amount of such term loans that Canyon is amending into extended term loans is approximately $182.9 million,” Emmis reported.
Prior to the entry into the Third Amendment, Emmis entered into a backstop letter agreement, dated March 27, 2011, with Canyon Capital which included Canyon’s consent to the amended loan agreement and Canyon’s commitment to purchase loans necessary to provide the required Lenders consent to the Third Amendment.  “In consideration of Canyon’s entering into Backstop Letter Agreement, Canyon will receive an exit fee of 6% (or 3% during the first 6 months after the Third Amendment becomes effective) on all existing Tranche B Term Loans and revolving credit commitments held or purchased on or prior to the date of the Third Amendment by funds or accounts managed by Canyon,” Emmis explained.

RBR-TVBR observation: This eliminates the claim by Alden Global Capital that Emmis is so cash-strapped that it can’t meet its covenant and debt obligations, as claimed it its lawsuit seeking to block Emmis from helping to fund Smulyan’s JS Acquisition in its lawsuit against Alden for walking out on their deal to take Emmis private. So Emmis will continue operating without any danger of default for some time to come and, as previously reported, the multiple lawsuits will go on and on as well.