Group owner LIN Television Corp. has paid $100M to withdraw from a joint venture involving stations in San Diego and Dallas, resulting in a taxable gain in the hundreds of millions of dollars and motivating a new organizational structure of the company.
The J.V. had LIN on the hook for an $815.5M note, and the $100M payment leaves it on the hook for a material gain of $715.5M in taxable income.
The other parties to the deal include General Electric Capital Corporation and NBC. GECC was left with a $715.5M note after subtracting LIN’s $100M. It sold the note to NBC for $602M and cancelled the $113.5M balance.
LIN estimates that $142M of the $715M will be considered ordinary income, and for tax purposes it is within the company’s $269M net operating loss carry-forward.
The remaining estimated total of $573M will likely fall under the capital gains category, and to help shield it from tax liability, LIN Television, organized as a corporation, will be merged into newly-created LIN Media LLC, with the latter the surviving entity.
LIN President/CEO Vincent L. Sadusky stated, “We are very excited about this transaction because it is the first step in resolving once and for all the NBC JV guarantee and tax overhangs that have in recent years limited our strategic options and have kept some investors on the sidelines. We plan to move as rapidly as practical to execute the merger that will cause the LLC Conversion and expect to close this transaction within the next four to six months.”
LIN also entered into a new reverse comp agreement with NBC for its seven affiliates that will be good through 2017.
Wells Fargo analyst Marci Ryvicker called the move a “significant positive.” The company is rated market perform.