For some time now Media General has been focused on reworking its debt. The company has finally come to terms with its lenders on amendments to its existing bank credit agreement that will give the company more financial maneuvering room.
Media General says the amendments include covenant modifications that will provide the company “more flexibility to operate in the current uncertain economic environment.” Importantly, the maturity date of $363 million of bank debt is pushed out from March 2013 to March 2015, in return for a partial pay down of amounts outstanding.
To do that, Media General has to raise some new cash. It will do that by going to the Wall Street bond market with a new issue of at least $225 million of notes by May 25th. Of the $225 million, a minimum of $190 million will be applied to pay down the outstanding term loan and an amount determined by formula will be set aside in a liquidity account.
Media General said its revolver is reduced to $45 million with no amount outstanding at this time. In addition to the term loan paydown, the revolver commitment will be correspondingly reduced if the liquidity account funding is increased by more than $15 million.
“We are pleased with the overall parameters of our new financing structure,” said Media General CEO Marshall Morton. “While interest costs will be higher in 2012, our amended credit agreement will provide Media General with more flexibility to operate, as well as expanded opportunities to reduce total debt through asset sales and pursuit of further refinancing options. Media General will continue to focus on accelerating its digital strategy through expanding paid-content initiatives, seeking beneficial partnerships with other fast-growing online businesses, developing new technology and broadening our product offerings,” he added.
The company said it expects operating cash flow in 2012 will cover interest payments, capital expenditures of approximately $20 million and retirement plan contributions of approximately $13 million.
The amended bank term loan facility has an interest rate of LIBOR with a 1.5% floor plus a margin ranging from 5% to 7% (and commitment fees ranging from 2.25% to 2.50%), determined by the company’s leverage ratio, as defined in the agreement. In addition to this cash interest, the company will accrue payment-in-kind (PIK) interest of 1.5%. PIK interest increases the bank term loan outstanding, is accrued on outstanding balances and is payable in cash on amounts outstanding at loan maturity.
Media General had delayed its 10-K filing because its financial crew was working on the refi. Now the company says it plans to file its 2011 Annual Report on Form 10-K on March 22, 2012.
Bank of America served as administrative agent on the transaction, and the Peter J. Solomon Company served as strategic advisor. J.P. Morgan will advise Media General on the issuance of new notes.
RBR-TVBR observation: This has been hanging over Media General for a long time. Now that the company’s finances have been put in order, we wait to see if it will move forward with any asset sales.