Financial struggles continue at Regent Communications, which has been in technical default of its loan terms since last Spring and has tried, thus far unsuccessfully, to regain access to its line of credit. Now Regent says it failed to make interest and principal payments that were due December 31, 2009. Regent’s stock plunged 36% Tuesday on the news.
Regent has been in technical default on its senior credit agreement since last April, when it reported receipt of a notice from Bank of America that a notation of doubts about the company’s ability to “continue as a going concern” from its independent auditor had put it in default under the terms of its loan agreement.
The radio group owner has been able to continue operating, since its stations have been generating cash flow, but it has not been able to access its line of credit. As recently as November the company said it hoped to regain access to that credit line before the New Year began. That did not happen and Regent now says it skipped making some payments which had been due by the end of 2009.
Here is the company’s account of the latest developments, as reported to the SEC:
“As previously disclosed by Regent Communications, Inc. and its subsidiaries (the ‘Company’) on its Current Reports on Form 8-K dated April 1, 2009 and May 8, 2009, the Company received notices of a Specified Default and an Event of Default, respectively, under its Credit Agreement dated November 21, 2006, from Bank of America, N.A., as the administrative agent for the lenders and secured parties under the Credit Agreement. On December 31, 2009 the Company did not make a scheduled payment of interest and principal owing to such lenders, and the Company has not paid certain professional fees on behalf of such lenders or other Fees owing to such lenders under the Credit Agreement. As of December 31, 2009, the outstanding balance under the Credit Agreement was $190,665,099.10. In addition, the Company did not make payments of $1,269,125.73 to counterparties to certain interest rate swap agreements that the Company had entered into pursuant to the terms of the Credit Agreement, which amounts were due on December 31, 2009.”
RBR-TVBR observation: Regent obviously did not succeed in its quest to regain access to that line of credit by the end of 2009, so it is apparently still trying to negotiate with its lenders – a process that has been taking place for many, many months. But actually missing a debt payment is a bigger deal than just being out of covenant compliance, so those talks have to take on a very serious tone now. The word on the street is that Regent is deep into discussions on how to cut its $190 million of debt in half to go forward, which would pretty much have to involve a debt-for-equity swap with the lenders and dilute the current shareholders.
One debt holder recently tried to pitch us the view that Chapter 11 is inevitable for Regent, but to date there has been no mention of that possibility by the company in its SEC filings. Investors apparently still have hopes of a successful negotiation with the lenders. Regent’s stock price, while still deep in penny stock territory, rose 189% over the course of 2009. However, as noted, it fell sharply on Tuesday after the SEC filing.