American Media completes exchange of 13½% second-lien senior notes

By Caroline Salls

Pittsburgh, Oct. 2 - American Media, Inc. completed the exchange of $94.3 million total principal amount of its existing 13½% second-lien senior secured notes due 2018 for an equal amount of new 10% second-lien senior secured PIK notes due 2018 on Wednesday, according to an 8-K filed with the Securities and Exchange Commission.

After the exchange, $10.6 million in principal amount of existing second-lien notes remains outstanding.

The new second-lien PIK notes are payable in kind at a rate of 10% until the earliest of Dec. 15, 2016, the closing of a refinancing of the company's 11½% first-lien senior secured notes due 2017 or the occurrence of specified events of default related to the application of the cash interest savings and a right of first offer, at which point the interest payable on the then outstanding principal amount of the new second-lien PIK notes will be payable at a cash interest rate of 13½% until the June 15, 2018 maturity date.

First-lien options

Subject to some exceptions, cash interest savings resulting from the exchange of the existing second-lien notes must be used to repurchase first-lien notes until the cash interest rate conversion date.

The participating holders have a right of first offer to sell any of their first-lien notes to the company before it repurchases the first-lien notes from any other holders, including under open market repurchases, the 8-K said.

Also under the exchange agreement, if the company completes a refinancing of the first-lien notes, it can require additional exchanges at its option.

Upon completion of a refinancing of the first-lien notes, the company may require the participating holders to exchange up to $55 million in total principal amount of the first-lien notes for new second-lien PIK notes or, alternatively, new second-lien cash pay notes to be issued at a future date and/or require the holders of all new second-lien PIK notes to exchange all of their new second-lien PIK notes for new second-lien cash pay notes.

In the event of the optional second-lien note exchange, some of the participating holders will have the right to designate an independent director to American Media's board under specified conditions.

Stock agreement amended

American Media said its stockholders entered an amendment to the existing stockholders' agreement on Wednesday to provide for one additional board member designated by some of the participating noteholders to be elected to the board in the event of an optional second-lien note exchange.

The additional board member can be elected as long as the participating holders own at least 50% of the new second-lien cash pay notes, the 8-K said.

The exchange agreement is expected to close next week and is subject to customary closing conditions.

American Media is a Boca Raton, Fla.-based publisher of celebrity journalism and health and fitness magazines.

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