Young Broadcasting has received a covenant amendment to its credit facility, reducing its operating cash flow requirement to address weak ad spending. In light of weaker ad sales, the company increased its various debt to operating cash flow levels, resulting now in a minimum operating cash flow level of $110 million. Currently the company's operating cash flow is $154 million. "This is a recognition that our operating cash flow is significantly lower and softening in the advertising media expenditure market," said James Morgan, cfo. The company was also given consent to issue more senior unsecured notes to be used to pay down bank debt. Young Broadcasting, based in New York City, owns 12 television stations.
Pricing was raised as a result of the amendments, although Morgan declined to specify. When asked if he was content with the pricing, Morgan replied with a laugh, "Sure, I always like giving the banks more money." Acknowledging the give-and-take companies and banks must make in a tighter market, he added "We're very pleased with their support. We have been very proactive in identifying when things are weakening, and the best way to approach the banks is to show we're conscious of weakening conditions. We designed the plan and went to the bank group. They helped us and came up with something that worked well for all the parties."
The company has an $800 million deal led byDeutsche Bank, First Union, and CIBC World Markets which expires in 2006. Pricing was originally LIBOR plus 23/ 4%. The company did a $500 million bond deal in February and used half the proceeds to pay down $253 million of bank debt. Young did an equity sale in June and used all proceeds to pay down $153 million of bank debt. Morgan explained that if the company does another bond issuance, the bank debt covenants will continue to stay in effect. If not, the original terms go back into effect in the first quarter of 2003.