With the sale of $220M worth of senior notes, radio group Entercom Communications Corporation has refinanced its old credit facility and installed a new one. The 10 1/2% notes are due in 2019, and are part of an arrangement that gives the company an aggregate borrowing pool of $425M.
Marci Ryicker of Wells Fargo said that the terms were more favorable for Entercom than WF had anticipated. Still, Entercom stock is expected to underperform, for two reasons: “(1) While the interest rate on this refinancing was better than what we had anticipated, they missed Street expectations; and (2) the refi overhang seems to be replaced with yet again the economic overhang resulting from the failure of the US Debt Supercommittee.”
For 2012, Ryvicker said Entercom is expected to generate free cash flow of about $52M and use $40M of that to pay down debt. That leaves the door open for a dividend payment, most likely sometime in 2013.
Entercom reported to the Security and Exchange Commission, “Pursuant to the Refinancing, Entercom Radio entered into the New Credit Facility, dated as of November 23, 2011, between Entercom Radio, as borrower, Entercom, as a loan guarantor, the other subsidiaries of Entercom Radio party thereto, as guarantors, and the lenders party thereto. The New Credit Facility consists of a $375 million term loan (the “New Term Loan”) and a $50 million revolving credit facility (the “New Revolver”), for aggregate borrowings of up to $425 million. Subject to certain conditions, the New Credit Facility also permits Entercom Radio to raise incremental facilities in an amount up to $125 million, which facilities would be secured by the same collateral securing the New Credit Facility.”
Entercom also provided details of the transaction and the use to which the funds were put. It told SEC, “On November 23, 2011, Entercom Radio issued and sold the Notes in the Offering at an offering price of 98.672% of their face value. Entercom Radio received net proceeds from the sale of the Notes in the Offering of approximately $212.7 million, after deducting the initial purchasers’ discount but before deducting related fees and expenses. Entercom Radio used the proceeds of the Notes, together with borrowings under the New Credit Facility, to repay the Old Credit Facility and to pay fees and expenses in connection with the Offering and the New Credit Facility.
The offering from Entercom was considered to be in the high yield rather than investment-grade arena.