Warner Music weighs action on 6¾% notes, completes refis, repricings

By Devika Patel

Knoxville, Tenn., Dec. 5 – Warner Music Group Corp. is considering what it plans to do with its 6¾% senior notes that become callable next year.

“The 6.75% [senior notes] are callable in the spring,” executive vice president and chief financial officer Eric Levin said on the company’s fourth quarter and year ended Sept. 30 earnings conference call on Tuesday.

“We’re aware of that and currently evaluating what our steps are. As we’ve shown over the past few years, we’re continuing to look at ways to optimize our capital structure and that’s absolutely something we’re evaluating,” he said.

The company has already taken steps to optimize the capital structure and has reduced its cost of debt and annualized interest expense over the past year.

“In the past year, we’ve taken several more steps to optimize our capital structure, including a bond deal, a series of refis, including the term loan rate repricing that launched last week,” Levin said.

“Through continued management of our capital structure, we’ve been able to reduce our cost of debt to 4.9% from 5.3% in 2016 and our annualized interest expense has come down by over $20 million this past year alone,” he said.

As of Sept. 30, the company reported a cash balance of $647 million, total debt of $2,811,000,000 and net debt of $2,164,000,000.

OIBDA for the full year was $473 million versus $507 million in the prior year.

OIBDA for the fourth quarter was $60 million versus $123 million in the prior-year fourth quarter.

On Nov. 28, the company held a lender call to launch a $1,006,000,000 covenant-light first-lien term loan due November 2023 that was talked at Libor plus 225 basis points with a 0% Libor floor and a par issue price.

The term loan includes 101 soft call protection for six months.

Credit Suisse Securities (USA) LLC was the lead arranger on the deal.

Proceeds were earmarked to reprice an existing term loan down from Libor plus 250 bps with a 0% Libor floor.

Expected term loan ratings were Ba3/B+.

Warner Music is a New York-based music content company.

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