A bank meeting to launch syndication of a $282 million credit facility for Patriot Media and Communications was held at the Ritz Carlton in New York last Thursday. The deal refinances existing debt and backs a dividend to Patriot's equity sponsors including Spectrum Equity Investors.
The Bank of New York is administration agent and BNY Capital Markets is sole lead arranger and bookrunner. The deal comprises a $47 million second-lien loan, a $160 million "B" loan, a $50 million "A" loan and a $25 million revolver. Banc of America Securities, which is new to the syndicate, is co-syndication agent and co-bookrunner. General Electric Capital Corp. is co-syndication agent and Société Générale and National City Bank are documentation agents.
Price talk on the first-lien tranches is LIBOR plus 2 3/4%, said a lender. The second lien price talk is LIBOR plus 5% with 102, 101 call protection. Leverage through the first lien is 5.7 times and 7 times total. Commitments are due July 28.
According to John Flanagan, Patriot cfo, the company has improved its performance since being bought from RCN in 2003. "We have grown cash flow to do this and the market supports this," Flanagan said of the dividend. In addition to providing new services, Patriot has more than doubled its high-speed cable customers. In his view, RCN would have made many of the improvements that Patriot has completed, but it would have been slower and less efficient. "RCN is very centralized. We were able to concentrate on this particular system," he said.
In addition, the banks have also altered their view on the cable sector. When the deal was announced back in 2002 it was a much tougher financing market for leveraged cable names. "Certainly more money is available now than it was back then," said Flanagan noting that the system has more than doubled in value since then. He declined to provide valuations, but reportedly the original sale was for $245 million (LMW, 11/3/02). He noted that Adelphia Communications Corp. is selling for 14 times cash flow and Cablevision is valuing the non-Dolan interest at 10.9 times cash flow, which he believes is on the low side. Further, Patriot has a better demographic, he added.