Veronis Suhler Stevenson and Ares Capital Corp. recently announced a new collaboration to lend money in the media sector. In a follow-up interview, RBR-TVBR asked the head of the venture, Bill Archer, for some more details.
With so many lenders exiting the media space during the recent advertising recession, we wanted to know why VSS and Ares are getting in.
“VSS has 25 professionals that have been for the last 25 years or more been servicing these targeted industries,” Archer explained. For most of that time it was strictly a majority control equity investor with entrepreneurs. “In 2005 we launched the mezzanine fund, and that was able to let our bankers address non-control equity investment with an entrepreneur who was not willing to sell control, but was willing to take some dilution. That’s preferred equity, common equity, debt with warrants. Now it’s a logical extension of the opportunities that these professionals are seeing to go into senior debt. And the risk-adjusted and reward metrics that we’re seeing there are attractive,” he said.
Even so, he doesn’t see the big banks rushing back into media lending. “If you don’t have $50 million of EBITDA they’re going to be reluctant,” Archer said.
The VSS-Ares venture is targeting companies with $5-35 million of EBITDA. “The typical multiples for those type companies is somewhere between two and five and a half,” he suggested. Both acquisition and refinancing loans will be considered.
Radio and television are within the broad list of media industries being targeted, including, of course, “new media” opportunities. What about the oldest medium of all? Yes, Archer would look at a newspaper loan application, “but it is a tough industry, as you know.”