As first reported last week by RBR/TVBR, Westwood One has been in negotiations with its lenders and has now announced an agreement in principle to refinance its capital structure. The lenders have agreed to refinance WW1’s $241 million in outstanding debt in exchange for $25 million in cash, a 25% equity stake and $117.5 million in new senior secured notes. Those new notes will mature July 15, 2012. In addition, WW1’s largest shareholder, The Gores Group, will inject more cash into the company. WW1 President and CFO Rod Sherwood calls the refinancing "an essential part of our turnaround plan."
The Gores Group, which has already seen its $100 million investment in WW1 evaporate to almost nothing on paper, will pay $25 million cash for new preferred stock and guarantee or otherwise provide credit support for a $20 million subordinated term loan and a $15 million unsecured revolving credit line. The combination of its common stock stake and the new preferred stock will give The Gores Group ownership of approximately 72.5% of the company’s equity, leaving other common shareholders holding only 2.5%.
“The refinancing is an essential part of our turnaround plan. We appreciate that our lenders, Gores and our other investors, continue to value our business and recognize the opportunity for long-term growth. A successful completion of the refinancing will allow us to continue to focus on delivering superior content and service, cost effectively, to Westwood One customers,” said CEO Sherwood.
The company’s announcement said the refinancing and infusion of additional capital will be “significant milestones” in WW1’s turnaround initiative – which includes actions to reduce debt, drive revenue initiatives, improve operating efficiency, increase financial flexibility and acquire new properties to further enhance the company’s traffic reporting, news, sports and entertainment leadership positions.
RBR/TVBR observation: The rumor is Rod Sherwood may not continue to run the company. He has always said that he never failed at doing fixing/refinancing for companies. Clearly, that’s true — he did the job well. Now, will Chairman Norm Pattiz stay on or retire and go out on top? He was likely instrumental in doing this deal as well. So, there may be a new hunt for a President/CEO to replace Sherwood. The person rumored to do this is Steve Lehman — he was an advisor to the Gores team when Gores made the initial investment. Also, since Gores is West Coast, could WW1 HQ be moving west once again? Ir could also be interesting how Lehman and WW1 President/Network Division Gary Schonfeld would get along, as Lehman was from Premiere and Schonfeld from Media America — arch competitors years ago.