AMC Networks Inc. Form 8-K Summary
Business Context and Reporting Period
This Current Report (Form 8-K) was filed on June 28, 2011, regarding events occurring on June 22, 2011. AMC Networks Inc. (the "Company") is a Delaware corporation reporting significant capital structure transactions related to the transfer of the AMC Networks business from its parent, CSC Holdings, LLC, pursuant to a Contribution Agreement dated June 6, 2011.
Key Financial Metrics and Capital Structure
The filing details two major financing arrangements intended to close on June 30, 2011:
- 7.75% Senior Notes due 2021: $700 million aggregate principal amount. Interest accrues at 7.75% per annum, payable semi-annually. Maturity date is July 15, 2021.
- Senior Secured Credit Facility: A total facility of $2.225 billion consisting of:
- $1.13 billion Term Loan A Facility.
- $595 million Term Loan B Facility (with approximately $577 million expected to be drawn as "Contribution Loans").
- $500 million Revolving Credit Facility (no draw expected on closing).
- Interest Rates: Floating rates based on Base Rate or Eurodollar/LIBOR plus margins ranging from 0.50% to 3.00% depending on the facility and cash flow ratios.
- Financial Covenants:
- Maximum Net Debt to Annual Operating Cash Flow: 7.00:1 initially, decreasing to 5.50:1 by January 1, 2015.
- Minimum Annual Operating Cash Flow to Annual Total Interest Expense: 2.50:1 initially, increasing to 2.75:1 by January 1, 2014.
Material Changes and Transaction Purpose
The Company is issuing the Senior Notes and borrowing under the Term B Facility to provide partial consideration to CSC Holdings for the transfer of the AMC Networks business. CSC Holdings intends to transfer these new debt instruments to selling noteholders to satisfy and discharge certain existing debt of CSC Holdings. The filing does not provide historical revenue, profit, or cash flow figures for the Company, as the focus is on the new debt issuance.
Outlook, Risks, and Contingencies
- Closing Conditions: The transactions are subject to customary closing conditions. While funding is expected, lenders are not obligated to fund, and there is no assurance funding will be available.
- Redemption Provisions: The Senior Notes are redeemable after July 15, 2016, at declining premiums starting at 103.875% and reaching 100% by July 15, 2019.
- Change of Control: Holders of the Senior Notes may require repurchase at 101% of principal plus accrued interest upon certain change of control events.
- Guarantees and Security: The Senior Notes are guaranteed on a senior unsecured basis by domestic restricted subsidiaries. The Credit Agreement obligations are guaranteed and secured by certain assets of the Company and its subsidiaries.
Investor Verification Checklist
- Verify the successful closing of the $700 million Senior Notes and the $2.225 billion Credit Facility on or before June 30, 2011.
- Confirm the transfer of the AMC Networks business from CSC Holdings to AMC Networks Inc. is completed.
- Review the specific definition of "Net Debt" and "Annual Operating Cash Flow" in the Credit Agreement to assess covenant compliance risks.
- Monitor the Company's ability to meet the initial 7.00:1 leverage ratio and 2.50:1 interest coverage ratio immediately following the transaction.
- Check for any subsequent filings regarding the satisfaction of CSC Holdings' existing debt using the proceeds from these new instruments.