Warner Music launches $250 million term loan add-on, repricing

By Sara Rosenberg

New York, April 18 - Warner Music Group Corp. launched a $250 million add-on to its $1.191 billion term loan at 1 p.m. ET Monday and is looking to reprice the entire $1.441 billion term loan tranche in connection with its proposed initial public offering of common stock, according to a market source. Bank of America is the lead bank on the deal.

The company is looking to take term loan pricing down to Libor plus 175 basis points if the senior secured debt is rated at least BB-/Ba3 or Libor plus 200 basis points if ratings are lower than BB-/Ba3, the source said.

Currently, the term loan is priced at Libor plus 250 basis points.

Warner is also looking to amend its credit facility to provide more flexibility under certain restrictive covenants, permit up to $90 million per year in dividends and eliminate prepayment requirements made with excess cash flow and with the proceeds of issuances of equity.

Subject to the amendment passing, the company plans on using the approximately $574 million of the anticipated $581 million IPO proceeds to redeem all outstanding floating-rate senior notes due 2011, all outstanding floating-rate senior PIK notes due 2014 and 35% of the outstanding 9.5% senior discount notes due 2014. Remaining IPO proceeds will be used for general corporate purposes.

Proceeds from the term loan add-on will be used along with cash on hand to repay $8.5 million of remaining preference promissory notes, to pay the $73 million termination fee, to pay a $141.5 million cash dividend, to pay special one-time bonuses and for general corporate purposes.

Warner Music is a New York-based music company.

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