Spanish Broadcasting enters forbearance deal with 12½% noteholders

By Caroline Salls

Pittsburgh, May 18 – Spanish Broadcasting System, Inc. entered into a forbearance agreement with an informal group of holders of more than 75.1% of its $275 million 12½% senior secured notes due 2017, according to an 8-K filed Thursday with the Securities and Exchange Commission.

Under the agreement, the supporting noteholders will not exercise any default-related rights until the earliest of 12:01 a.m. ET on May 31 and the occurrence of a termination event.

The forbearance covers a default related to the company’s failure to make its principal payment on the notes that was due on April 17 and to transfer funds maintained in accounts subject to one or more deposit account control agreements in favor of the collateral agent under the indenture and related security documents.

Spanish Broadcasting said it does not intend to make any principal payment during the term of the forbearance agreement.

As part of the agreement, the company will make monthly, as opposed to semiannual, interest payments of $2.86 million on the notes for the periods of April 15 through May 15 and May 16 through June 15.

Spanish Broadcasting also agreed to pay a consent fee to the supporting noteolders equal to 0.35% of the principal amount of the notes held by those parties and to pay their legal fees and financial adviser due diligence fees.

As previously reported, the company did not repay the notes at maturity on April 19.

On that date, Spanish Broadcasting also disclosed that it was working with a team of financial and legal advisers in evaluating all options available to it in executing on a comprehensive recapitalization plan.

As part of that plan, the company said it initiated conversations with representatives of the holders of the notes and the holders of its 10¾% series B cumulative exchangeable redeemable preferred stock.

According to the 8-K, the forbearance is “a positive development in the company’s ongoing evaluation and execution of its comprehensive recapitalization plan and provides the company with added flexibility to continue negotiations with the holders of the notes and the holders of the series B preferred stock.”

With the support of the noteholders, Spanish Broadcasting said it is in the process of refinancing the notes and selling non-core assets, including some of its television stations and real estate assets, in its continued efforts to deleverage its balance sheet.

The company is a Coconut Grove, Fla.-based Spanish language broadcaster.

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