Business Context and Reporting Period
Company: Entravision Communications Corporation
Filing Type: Form 8-K (Current Report)
Date of Report: May 31, 2013
Event: Entry into a definitive material agreement establishing a new credit facility.
Key Financial Metrics and Debt Structure
The filing details the establishment of a new senior secured credit facility with a total capacity of up to $405.0 million, subject to an additional $100.0 million expansion option. The facility is structured as follows:
- Term Loan A Facility: $20.0 million (Senior Secured).
- Term Loan B Facility: $375.0 million (Senior Secured).
- Revolving Credit Facility: $30.0 million (Senior Secured).
Interest Rates: Borrowings bear interest at Base Rate or LIBOR plus an Applicable Margin. Initial margins are 1.50% (Base Rate) or 2.50% (LIBOR) for Term Loans. Revolving Loan margins are initially the same but may adjust based on the First Lien Net Leverage Ratio (ranging from 1.25% to 2.50% depending on leverage).
Maturities:
- Term Loan A: Expires on the earlier of the Term Loan B Borrowing Date or August 15, 2013.
- Term Loan B: Matures May 31, 2020.
- Revolving Credit Facility: Matures May 31, 2018.
Security and Guarantees: The facility is guaranteed by all existing and future wholly-owned domestic subsidiaries and secured on a first priority basis by the Company's assets. It ranks senior to the Company's 8.75% Senior Notes due 2017.
Material Changes and Use of Proceeds
The Company entered into this agreement to refinance existing debt and fund a redemption of senior notes. Specific uses of proceeds include:
- Immediate Use (Term Loan A): Repay in full all outstanding obligations under the Former Credit Agreement (dated December 20, 2012) and pay associated fees and expenses.
- Future Use (Term Loan B): Intended to be drawn between August 1, 2013, and August 15, 2013, to repay the Term Loan A Facility in full and redeem in full the Company's 8.75% Senior Notes due 2017.
- Future Use (Revolving Facility): Working capital, capital expenditures, general corporate purposes, and funding a portion of certain acquisitions.
Upon the redemption of the Senior Notes, the security interests and guarantees under the Senior Notes indenture will be terminated and released.
Covenants, Risks, and Contingencies
Financial Covenants: The facility requires compliance with a total net leverage ratio covenant if the revolving credit facility is drawn.
Negative Covenants: The agreement limits the Company's ability to incur additional indebtedness, create liens, dispose of assets, consummate mergers, make certain investments, enter affiliate transactions, or change accounting methods.
Events of Default: Include payment defaults (interest or principal), covenant violations, cross-defaults on indebtedness aggregating $15.0 million or more, judgments over $15.0 million, bankruptcy, change of control, and material adverse amendments to media licenses.
Repricing Fee: If the Company engages in a transaction reducing the yield of Term Loan B within six months of the borrowing date, a 1% repricing fee on the affected amount is owed to lenders.
Investor Verification Checklist
- Verify the exact date of the Term Loan B Borrowing (expected between August 1-15, 2013) to confirm the timeline for Senior Note redemption.
- Confirm the Company's current First Lien Net Leverage Ratio to determine if the Revolving Credit Facility interest margin will remain at the initial 2.50% (LIBOR) or adjust downward.
- Review the specific terms of the "Former Credit Agreement" being repaid to understand the full scope of the refinancing.
- Monitor compliance with the total net leverage ratio covenant, particularly if the Company draws on the Revolving Credit Facility.
- Check for any subsequent filings regarding the actual drawdown of the Term Loan B Facility and the execution of the Senior Note redemption.