Young Broadcasting is amending a 2003 facility to buy back $246.89 million of 8 1/2% senior notes due 2008. The amended facility includes a five-year, $20 million revolver and a new seven-year, $275 million "B" loan. "The structure is very attractive from a flexibility standpoint and the pricing was right," said James Morgan, cfo, explaining why the company decided to take out the loan. Regarding the cash offering he said, "The marketplace is very receptive to these kinds of offerings, so we were quite interested in doing it."
Wachovia Securities, Lehman Brothers, Merrill Lynch and BNP Paribas were the lead on the first facility and the amended loan. "All of the banks we have dealt with for years, we have good relationships with them and they are very creative; creative in understanding our needs and structuring transactions to work well with our needs," he said. The existing facility put in place in December 2003 consisted of a four-and-a-half year, $20 million revolver with pricing of LIBOR plus 3 1/4%. The revolver was not drawn upon.
Morgan said the company had extraordinarily high leverage following a transaction to buy KRON-TV an NBC network affiliate in 2000, which NBC dropped in 2002. The station has been running as an independent since then with a cashflow less than it had as an affiliate, Morgan said. "It left us with an inability to earn as much cash flow as we thought we would," he said. "The current plan is to take leverage down by operating more efficiently and continuing to grow revenue. We are looking to reduce leverage of the operations in the future." He estimates that the company has about $635 million in net debt. The company had EBITDA of $52.6 million in 2004.