The really good news from the 6th Annual RBR-TVBR Financial Roundtable is that lenders are back – both the bond markets and the banks. So, what kind of leverage will they support in this post-recession world?
“Sure the debt markets have returned with enthusiasm in terms of interest in both radio and television and especially outdoor. Acquisition financing is available. LBO financing is available,” said Kristin Allen (pictured), Managing Director, Credit Suisse. She sees bank and bond leverage together being able to go to six, six and a quarter or six and a half times EBITDA as the “sweet spot” these days.
Above that leverage, though, you’ll have to pay more to get a financing done. Some large broadcasters have been able to go into the 8-10 times range to accomplish refinancing.
“Let me jump in because that helps to explain where the transaction market is going to go because those multiples are substantially higher than mid-market companies can see in the private capital market,” interjected David Abraham, Managing Director, DAC Media Capital. “Banks and finance companies aren’t going to get much past four and a half or five at the outside and are going to exact a very high premium for doing so, which simply makes the smaller buyer without access to Kristin’s capital market at a severe disadvantage,” he noted. “Definitely we’re seeing the big banks and institutions coming back to the bigger deals. Are we seeing any moves by lenders to come back down into the mid-market and even into the small deals?” asked RBR-TVBR Executive Editor Jack Messmer.
“The answer is yes. We’re in the market currently on a radio deal and a publishing deal and the survey of lenders that I’ve done in the last two weeks is the most encouraging that I’ve seen in probably three years. Multiples are up, enthusiasm is up, it’s almost as if in the last two weeks lenders and bank management said okay the first quarter’s over let’s get back to lending we have a lot of capital to put to work,” said Abraham.
“It’s better but there’s still some meaningful differences in the bank lender market than what we saw two, three years ago,” noted Allen. “Two, three years ago conventional banks were willing to provide whole capitalization and very big revolvers and undrawn revolvers,” she said – something that’s now available only to broadcasters with better credit ratings.
The discussion covered a wide range of financial issues facing broadcasters today. You can listen to the entire Roundtable as part of the most recent issue of Manager’s Business Report. There’s no subscription charge for MBR, but you have to opt-in. If you haven’t done so already, click here.