With two big acquisitions pending, it is no surprise that Sinclair Broadcast Group has gone back to its bankers to increase its credit facilities. Sinclair announced Monday that it will add up to $530 million in borrowing capacity.
Under the proposed terms, Sinclair said it would add an initial $280 million term loan to its existing $222.5 million tranche B term loan maturing October 2016 and an additional $250 million to its existing $115.0 million tranche A term loan maturing March 2016. In addition, Sinclair would increase its existing revolving line of credit from $75.4 million to $100 million and extend the maturity of the revolving line of credit from 2013 to be coterminous with the term loan A maturity of March 2016.
Sinclair said the additional term loans, along with cash on hand and/or a draw under the revolving line of credit, would be used to fund the previously announced acquisitions of Four Points Media for $200 million and the television stations of Freedom Communications for $385 million. Sinclair says the Four Points deal is now expected to close in early January 2012 and the Freedom acquisition in late march 2012.
“The two acquisitions will generate significant free cash flow (FCF),” Wells Fargo securit5ies analyst said in a note to clients. “By our calculations the incremental debt will add ~$16.8M of annual interest expense. That said, SBGI estimated that the acquisitions will add $59M of blended FCF ($53M in odd years, $65M in even years) on its Q3 earnings call, so net-net these acquisitions will be significantly accretive.”
The bottom line, according to Ryvicker: “Given the company’s prior commentary on funding its recent acquisitions and interest in additional ‘smart’ deals today’s announcement is not a surprise. We continue to like both of SBGI’s recent acquisitions as they diversify SBGI away from FOX, are expected to generate significant free cash, and will raise SBGI’s current leverage by only 0.5x on a pro-forma basis.”
RBR-TVBR observation: Sinclair’s stock was up even more than the market in general on Monday. Wall Street apparently liked the company’s ability to get its bankers to extend additional credit to close the pending acquisitions. Also, the stock, which pays a hefty 5.4% yield, will trade ex-dividend on Tuesday.