What started as a routine refinancing effort back in June turned into a nightmare for Radio One as it struggled to come to terms with its lenders and bondholders, eventually leading to technical default on some of those loans and bonds as the negotiations dragged on and on. Now the negotiations have finally produced a comprehensive refinancing deal.
Radio One has negotiated a new credit facility agreement with i8ts senior lenders, led by Wells Fargo Bank, and announced the amended terms of the long-pending exchange offer that will refinance substantially all of its existing indebtedness under its 8-7/8% Senior Subordinated Notes due 2011 and its 6-3/8% Senior Subordinated Notes due 2013.
There are still some high hurdles to be cleared. The note exchange requires at least 95% of each of the two issues to be tendered for the exchange and not withdrawn. However, Radio One has signed a “support agreement” with a group of bondholders representing approximately 84.7% of the 2011 notes and 87.9% of the 2013 notes, so it only needs to round up about half of the outstanding notes not covered by the agreement with those big holders.
One payoff for bondholders is that upon successful completion of the exchange offer Radio One expects Wells Fargo Bank, as the agent for its senior lenders, to lift the order which had blocked the radio company from making the interest payment on the 2013 notes that had been due August 16th. It is anticipated that the interest payment will be made on the settlement date for the note exchange, which is expected to follow quickly after the exchange offer deadline of November 19th (unless extended).
Here are the basic terms of the amended exchange offer:
-Radio One will pay $1,000 principal amount of the Company’s new 12.5%/15.0% Senior Subordinated Notes due 2016 in exchange for each $1,000 in principal amount of the 2011 Notes; and $950 principal amount of the new notes in exchange for each $1,000 principal amount of the 2013 Notes, along with a concurrent consent solicitation to amend the indentures governing the existing notes to delete substantially all of the covenants contained therein.
-The terms of the exchange notes have been amended to provide for a maturity of 66 months after initial issuance; interest to accrue at a rate of 12.5% per annum if paid in cash or 15.0% per annum if paid partially in cash and partially through the issuance of additional notes (if Radio One so elects through May 15, 2012); and that the new notes will only be subordinated in right of payment to borrowings of up to a maximum of $415 million and any other obligations under the company’s credit facility with the senior lenders.
As for the amended credit facility:
-It will establish new financial covenant levels; permit the Amended Exchange Offer and the payment of interest on the 2013 notes that was otherwise due and payable on August 16, 2010; and waive any existing default or event of default that may have arisen under the existing credit facility agreement.
-The amended loans will replace $323.0 million of outstanding revolving loans with a new term loan; and provide revolving credit borrowings of up to $20.0 million that Radio One can utilize for working capital and general corporate purposes and an additional $18.8 million that can only be used for certain specified purposes, in each case subject to certain conditions and limitations.
RBR-TVBR observation: The refi nightmare for Radio One appears to be over, but it certainly diverted corporate attention from operations and/or sufficient sleep for months to reach a comprehensive agreement. Despite the technical defaults, management insisted all along that it was making progress in the negotiations – and it finally achieved success.