Young Broadcasting CFO: current high yield market presents tough choice

By Paul A. Harris

St. Louis, Mo., Nov. 14 - As Young Broadcasting continues discussions with its bondholders and bankers in an attempt to clear the way for up to $250 million of new high yield debt, the company's chief financial officer reports that the decision whether or not to come into the present high yield primary market is a difficult one for an issuer to make.

"We haven't really committed to doing this deal at the current rates," Jim Morgan commented in an interview with Prospect News.

"If I did this amount today, I'd probably do it at about 10%. And I haven't decided I want to do it at 10% yet," he added.

On Oct. 30 Standard & Poor's assigned its B rating to Young Broadcasting's proposed offering, and downgraded the company's outstanding debt one notch. On Nov. 6, Moody's Investors Service assigned the proposed deal its B2 rating, and likewise lowered the company's outstanding debt one notch.

Whether or not Young Broadcasting can proceed with the Rule 144A issuance hinges on the acceptance by holders of the company's 9% senior subordinated notes due 2006 of a consent solicitation from the company.

Young Broadcasting announced the offer in a press release on Oct. 26. It is offering to pay $10 cash per $1,000 principal amount of its 9% notes if proposed amendments to the indenture become effective. The solicitation of consents will expire at 5 p.m. ET on Nov. 15, having been extended twice.

The press release identified a syndicate of banks managing the planned bond offering: Deutsche Banc Alex. Brown Inc., CIBC World Markets Corp. and Wachovia Securities, Inc.

There are restrictive covenants in the 2006 notes, Morgan explained, that need to be amended before the company can issue new debt.

"We've extended the offer twice because we're in discussion with the bondholders," Morgan commented, adding that he is confident that the bondholders will eventually consent to the amendments.

Morgan said that Young Broadcasting has also requested that its senior lenders agree to certain amendments to the company's senior credit facility.

Once Young Broadcasting comes to agreements with its bankers and bondholders, however, Morgan still must decide if the market conditions are right for a new bond offer.

In particular he is looking for lower interest rates.

"We've heard from our bankers that there is considerable interest among investors in this paper, should we decide to bring it," Morgan said.

"However," he continued, "I think right now you have a number of issuers, like ourselves, who are cautious. We don't really want to go out with an issue that flops.

"Everybody wants to make sure that this is something that the market place is interested in, and wants. So I think we're all being very careful."

End

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