Media General drops loan amendment request for debt flexibility

By Sara Rosenberg

New York, Sept. 21 – Media General Inc. decided to retract its amendment proposal that would have provided it with room to use all senior debt for its acquisition of Meredith Corp., according to a market source.

The amendment was voluntary as the company is planning on using a combination of incremental senior secured term loan B debt and bonds for the acquisition, and after raising the amendment fee to 50 basis points from 25 bps last week, it was decided that pushing for approval of the amendment was not worth the effort, the source explained.

The amendment would have revised the net first-lien debt incurrence limit to 5.25 times at closing of the acquisition from 4 times, the net secured debt incurrence limit to 5.25 times from 4.5 times and the unsecured debt incurrence limit to 6 times from 5.5 times.

RBC Capital Markets LLC led the amendment.

As previously reported, Media General has received a commitment for $2.8 billion in financing to help fund its purchase of Meredith.

RBC Capital Markets and JPMorgan Chase Bank are the lead banks on the debt.

Under the agreement, Meredith stockholders will receive cash and stock valued at $51.53 per share, for a transaction value of about $2.4 billion. Based on Meredith’s net debt balance of $772 million at June 30, the transaction enterprise value is around $3.1 billion.

Media General has formed a new holding company, which after closing will be named Meredith Media General. Media General shareholders will receive one share of the new holding company for each share of Media General they own upon closing. Meredith shareholders will receive $34.57 in cash and 1.5214 shares of the new holding company for each share of Meredith they own upon closing.

Pro forma net leverage at closing is expected to be less than 5.5 times.

Significant free cash flow is anticipated to be used to rapidly pay down debt, so that within two years leverage will be in the 3 to 3.5 times range.

Pro forma annual revenue of the combined company will be $3 billion, and EBITDA will be more than $900 million.

Closing is expected by June 30, 2016, subject to approval of Media General and Meredith shareholders, as well as customary closing conditions and regulatory approvals, including approval by the Federal Communications Commission and clearance under the Hart-Scott-Rodino Antitrust Improvements Act.

Media General is a Richmond, Va.-based television broadcasting and digital media company. Meredith is a Des Moines, Iowa-based media and marketing company.

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