Digital Media amends credit facility with lenders for PIK option

Chicago, Aug. 18 – Digital Media Solutions LLC reported an Aug. 16 amendment to its outstanding $275 million credit facility initially comprised of a $50 million revolver and a $225 million term loan in a 10-Q filing with the Securities and Exchange Commission on Friday.

The amendments allow for payment in kind on the quarterly interest payments due on Sept. 30 and for the each of the following three quarters.

All paid-in-kind interest will need to be repaid by Dec. 31, 2025.

The interest rate has been amended to reflect the payment-in-kind option.

PIK interest will be at SOFR plus 1,100 basis points. If during the four-quarter PIK period the company elects to pay cash, interest will be at SOFR plus 800 bps.

Noted in previous Prospect News publications, Moody’s Investors Service lowered its rating on the credit facility to Caa1 from B2 in January 2023 and S&P Global Ratings rated the loan as CCC+ instead of an earlier B- in December 2022.

The amendments allow that if the company brings the Moody’s rating back up to B3 and the S&P rating up to B- and the PIK interest has been repaid, then the interest rate will be changed to SOFR plus 600 bps.

All of the interest rates have been increased from where they were in a July 3 amendment when the basis was transferred to SOFR from Libor, at SOFR plus 425 bps for the revolver and SOFR plus 500 bps for the term loan.

If any loans under the credit facility are still outstanding after Jan. 1, 2025, back-end PIK interest will be 5% for the period from Jan. 1, 2025 to June 30, 2025, 7.5% for the period from July 1, 2025 through Dec. 31, 2025 and 10% in calendar year 2026 until maturity.

The covenants have been amended to eliminate the total net leverage ratio covenant for the remainder of 2023, including the second quarter. Starting in 2024, the total net leverage ratio of Digital Media and its restricted subsidiaries will be set at 15.6x and 10.6x for the first and second quarters, respectively. It will vary for every quarter thereafter, down to 6.9x for the fourth quarter of 2025 and until maturity.

No equity cure may be taken to cure any breach of the total net leverage ratio.

There is a minimum liquidity covenant of $9 million for the rest of 2023 and $10 million thereafter.

The five-year loan was originally signed on May 25, 2021.

Digital Media is a Clearwater, Fla.-based adtech company.

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