Media General ups eight-year notes to $400 million, to price Friday at discount to yield 5.954%

By Paul Deckelman

New York, Oct. 31 – Media General Inc. upsized its planned offering of eight-year senior notes (B3/B+) to $400 million from $300 million and is expected to price the issue at a discount to yield 5.954%, high-yield syndicate sources said Friday.

The sources said that bonds would price at 99.5 with a coupon of 5 7/8% in order to reach that yield.

That would be inside of the price talk that circulated on Thursday, which envisioned a yield in the 6% to 6¼% region.

The sources said that investors would re-confirm orders as necessary up to a deadline of 10 a.m. ET on Friday morning, with pricing expected to take place sometime thereafter.

The deal had been originally expected to price as a quick-to-market transaction on Thursday after the order books were closed at mid-afternoon, just hours after it was first announced Thursday morning and then pitched to potential investors via a mid-morning conference call.

The Rule 144A and Regulation S offering, which is being sold with registration rights, is being brought to market via left bookrunning manager RBC Capital Markets Corp., along with joint bookrunners Capital One Securities, Deutsche Bank Securities Inc., SunTrust Robinson Humphrey Inc. and U.S. Bancorp Investments Inc.

Co-managers on the deal are Barclays, BofA Merrill Lynch, MUFG and Mizuho Securities USA Inc.

The notes will have three years of call protection and a change-of-control put at 101%.

The bond deal will settle into escrow on Nov. 5.

Media General, a Richmond, Va.-based television broadcasting and digital media company, is selling the notes as part of the financing for its pending merger with sector peer LIN Media LLC, a TV broadcasting and multimedia company.

The funding also will include a new credit facility that was launched last Oct. 24 via joint lead arrangers RBC, Deutsche Bank, SunTrust Robinson Humphrey, U.S. Bank and Capital One.

Besides the upsizing of the bond deal, the syndicate sources said Friday that there would be changes made to the credit facility portion of the financing, which was originally planned to total $1,015,000,000.

A planned $600 million term loan A tranche was dropped entirely, and a planned $325 million term loan B-2 tranche will now be upsized by $500 million, to $825 million from $325 million originally. That tranche will now be covenant-lite, while the existing term loan-B tranche will maintain its maximum total net leverage covenant.

The bank financing was also expected to include a $90 million incremental revolving credit line.

With the changes, the projected secured leverage ratio that the company will carry post-transaction, with debt expressed as a multiple of EBITDA, will be reduced to 3.6 times from the originally planned 3.8 times, although the total leverage ratio will remain the same, at 5.0 times.

Potential investors in the term loan portion of the financing have been given a commitment deadline of 3 p.m. ET on Friday.

The notes are being officially issued by issued by Media General Financing Sub, Inc. Upon the closing of the merger, this unit will merge with and into LIN Media subsidiary LIN Television Corp., which will continue as the surviving corporation and assume all of the issuer’s obligations under the indenture governing the notes.

The proceeds from the note issue, together with cash on hand, proceeds from previously announced divestitures and bank borrowings through proposed amendments to its existing credit agreement, will be used to pay a portion of the merger consideration for the business combination with LIN, repay certain existing debt of LIN and to pay related fees and expenses.

Under the merger agreement LIN shareholders will receive $25.97 in cash or 1.4714 shares of the new holding company, subject to proration. The maximum cash amount that will be paid to the LIN Media shareholders is $763 million. Media General shareholders will receive one share of the new holding company for each share of Media General that they own upon closing.

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