E.W. Scripps Co. is meeting with lenders Thursday about $225 million in add-ons to existing loan facilities, as it prepares to complete a complex merger that will spin-off off its newspaper unit from its broadcast operations.
According to ratings agency reports, E.W. Scripps which last year announced plans to merge with Journal Communications, publisher of The Milwaukee Journal is seeking a $200 million add-on to its existing $198 million term loan B due 2020, and a $25 million upsizing of its revolver to $100 million.
Price talk on the term loan tack-on is Libor plus 275 bps, with a 99 cents on the dollar original issue discount, a 0.75% Libor floor and 101 six month call protection, according to reports. The talk is reportedly higher that the existing rate.
SunTrust Robinson Humphrey is the sole bookrunner.
According to Moody’s Investors Service, the incremental proceeds will be used to refinance Journal Communications’ debt as well as pay a $60 million dividend. Moody’s affirmed the Ba2’ rating of the new company, which will be one of two publicly traded firms that will operate after the merger closes this year. It also affirmed the Ba2’ ratings of the existing loans with the upsized proposals.
Standard & Poor’s this week upgraded E.W. Scripps’ corporate rating to BB’ from BB-.’ The agency also raised the senior secured debt rating to an investment-grade BBB-’ rating, from BB+’, with a 1’ recovery rating.
In a deal announced last July, E.W. Scripps and Journal Communications detailed a plan where the two companies would merge their broadcast media operations under the E.W. Scripps name, and spin off both firms’ daily and community newspapers and related digital content products into a company called Journal Media Group.
The merged broadcast operations would create the fifth largest television station ownership group in the country, tapping into most of the 75 largest markets. Moody’s is bullish on the prospects for the combined broadcast group, given Scripps’ ratings success with its local news operations at No.1 or No.2 in ratings in eight of its 15 markets.
"Management plans to replicate this success by investing in the stations being added from Journal Communications. Moody's believes risks related to the assimilation of acquired stations are mitigated given management's track record with prior acquisitions (McGraw-Hill in 2011 and Granite in 2014)," stated Carl Salas, Moody's vice president and senior credit officer, in a statement.
Moody’s estimates post-merger debt-to-Ebitda of 3.6x, while S&P pegs it between 2x-3x.