One of the nation’s biggest broadcast TV companies has just lowered its annual interest expense by roughly $7 million while increasing its free cash flow by approximately $5 million each year.
How so? Nexstar Media Group has received commitments for a $2.676 billion refinancing of its outstanding Senior Secured Term Loan facilities, including the balance of the $703 million Senior Secured Term Loan A due January 2023 and the $1.807 billion Senior Secured Term Loan B due January 2024.
Concurrently, Nexstar will also be refinancing its $166 million Senior Secured revolving credit facility due 2023, which was undrawn as of June 30.
Nexstar expects the refinancing transaction to close on or about Friday, October 26,
“The refinancing of our Senior Secured Term Loan facilities and revolving credit facility … again highlights Nexstar’s focus on actively managing our capital structure and cost of capital to drive free cash flow growth while affording us the financial flexibility to act on other opportunities to enhance shareholder value,” Nexstar President/CEO and Chairman Perry Sook said.
In addition, Nexstar continues to allocate cash from operations and “exceptionally strong political advertising” to make what Sook calls “meaningful reductions in our senior secured debt.”
He said, “The active management of our capital structure combined with strong free cash flow generation positions Nexstar to pursue a range of actions to enhance shareholder returns on both a scheduled and opportunistic basis, including the payment of quarterly cash dividends, share repurchases, further leverage reduction and accretive acquisitions.”
Sook continues to expect Nexstar’s net leverage, absent additional strategic activity, to be in the mid-to-high 3x range at the end of 2018.
The new $1.657 billion Senior Secured Term Loan B facility was issued at par and bears interest at a rate of LIBOR plus 2.25%, while its maturity remains unchanged. The new five-year $853 million Senior Secured Term Loan A facility was issued at par and initially bears interest at a rate of LIBOR plus 1.75%, with periodic adjustments thereafter according to a leverage based grid.
Nexstar’s new five-year Senior Secured revolving credit facility has a total capacity of $166 million and initially bears interest at a rate of LIBOR plus 1.75%, with periodic adjustments thereafter according to a leverage based grid. The new terms represent a 25 basis point interest rate reduction compared to the company’s prior Senior Secured Term Loans and revolving credit facilities.