How Cumulus will fund a $4 billion company

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As Cumulus Media heads to Wall Street to sell $610 million in new bonds it has spelled out how it will handle the financing to create a $4 billion-plus company. That’s the radio giant (second only to Clear Channel) being created as Cumulus rolls in CMP and acquires Citadel Broadcasting.


The $610 million private placement is just one piece of the puzzle. In fact, it’s not even the biggest debt piece. That would be the new senior term loan of over $2 billion from Cumulus Media’s bankers. They’re also supplying a $71.7 million revolving credit facility.

The rest is coming on the equity side, including the new Cumulus stock to be issued to Citadel shareholders and to the majority owners of Cumulus Media Partners (CMP), which is minority owned and managed by Cumulus Media.

The chart below was filed with the SEC by Cumulus Media in conjunction with its private placement of the $610 million in senior notes due 2019 to show the cash and equity coming into the transactions (source of funds) and the uses of funds to create the new, merged company. You can also add in about $185 million for the existing Cumulus Media stock, so the total package creating the new company is about $4.2 billion.

There are quite a few footnotes, since the cash/stock split for Citadel shareholders depends on which option they choose under the deal. Likewise, the equity investment proceeds will be determined by how much cash has to be paid to the Citadel shareholders at closing.


                     
   
Sources of funds (dollars in millions)   Amount     Uses of funds   Amount  
   
                     
Acquisition Credit Facility:(1)
                   
Revolving credit facility
  $ 71.7     Cash consideration in Citadel Acquisition(6)   $ 1,152.7  
Term loan
    2,040.0     Equity consideration in CMP Acquisition(4)     80.3  
Notes offered(2)
    610.0     Equity consideration in Citadel Acquisition(5)     713.0  
Gross proceeds from Equity Investment(3)
    395.0     Refinance existing net debt and subsidiary’s preferred stock(7)     1,876.9  
Equity value for issuance in CMP Acquisition(4)
    80.0     Redemption premium on Citadel Senior Notes(8)     31.0  
Equity value for issuance in Citadel Acquisition(5)
    713.0     Fees and expenses(9)     141.7  
Proceeds from assumed exercise of all outstanding Citadel stock options
   

91.6

    Cash to balance sheet     5.0  
Total sources
  $ 4,000.6     Total uses   $ 4,000.6  
 
 
     
(1)   Represents borrowings to effect the Global Refinancing.
 
(2)   Represents the aggregate principal amount of notes offered hereby, before payment of any unamortized original issue discount or fees or expenses.
 
(3)   Represents the aggregate proceeds from the Equity Investment at the Maximum Stock Cap, before payment of any fees due under the Investment Agreement. If holders of Citadel stock were to make elections resulting in a payout equal to the Maximum Cash Cap, then gross proceeds from the Equity Investment would be $500.0 million.
 
(4)   Value of shares of Cumulus common stock to be issued to the CMP Sellers in the CMP Acquisition.

     
(5)   Value of shares of Cumulus common stock to be issued in the Citadel Acquisition, assuming that all outstanding Citadel stock options are exercised and holders of 50% of Citadel stock elect to receive cash and holders of 50% of Citadel stock elect to receive shares of Cumulus common stock in the Citadel Acquisition, which results in a payout equal to the Maximum Stock Cap.
 
(6)   Represents cash portion of Citadel Acquisition Consideration, assuming that all outstanding Citadel stock options are exercised and holders of 50% of Citadel stock elect to receive cash and holders of 50% of Citadel stock elect to receive shares of Cumulus common stock in the Citadel Acquisition, which results in a payout equal to the Maximum Stock Cap. If holders of Citadel stock were to make elections resulting in a payout equal to the Maximum Cash Cap, then borrowings under the Acquisition Credit Facility (without giving effect to the use of any cash on hand) would be $2,415.0 million and the gross proceeds from the Equity Investment would be $500.0 million.
 
(7)   Consists of repayment of outstanding indebtedness of each of Cumulus, CMP and Citadel, and redemption of outstanding preferred stock of Radio Holdings in accordance with its terms (each as of December 31, 2010). We intend to use the net proceeds from the offering of notes to repay outstanding amounts under the term loan facility under our Existing Credit Agreement.
 
(8)   Estimated premium payable in connection with redemption pursuant to the terms of the Citadel Senior Notes.
 
(9)   Represents estimated fees and expenses associated with the Global Refinancing and the Equity Investment, including financial advisory fees, commissions, commitment and syndication fees, the initial purchasers’ discount related to the notes and other transactional fees and expenses.
The company then had this to say about its resulting leverage:
“Assuming the consummation of each of the CMP Acquisition and the Citadel Acquisition, and the completion of the Global Refinancing, including the Equity Investment, on January 1, 2010, we believe that, as of December 31, 2010 and based on an Overall Pro Forma Basis adjusted EBITDA for 2010, after giving effect to (i) all projected synergies from reductions in corporate overhead, cost of sales, mutual overlays and network operations of approximately $51.9 million in the aggregate (the majority of which we believe can be achieved within one year of the closing of the Citadel Acquisition), and (ii) contractual savings of $6.3 million in 2010 associated with the modification of the terms of our agreement with Nielsen in December 2010, we would have had a total debt to Adjusted EBITDA ratio of approximately 5.7:1.”