Mediaco Holding Inc. current report, 25 November 2019

Открыть документ

Business Context and Reporting Period

MediaCo Holding Inc. filed this Form 8-K for events beginning November 25, 2019. The company completed its separation from Emmis Communications and became an independent public company on November 26, 2019. MediaCo operates the WQHT-FM and WBLS-FM radio stations in New York. Its next fiscal year-end is December 31, 2019, requiring a transition Form 10-K for the ten-month period ended December 31, 2019.

Key Financial Metrics and Capitalization

  • Purchase price for the contributed radio assets: $91.5 million.
  • Senior secured term loan: $50.0 million initial borrowing capacity under a five-year facility, plus a potential additional tranche of $25.0 million. Interest is based on LIBOR plus 7.5%; quarterly principal amortization equals 1.25% of the initial aggregate principal amount beginning December 31, 2019.
  • SG Broadcasting investment: $41.5 million for 5,359,753 Class B shares, representing approximately 76.28% of equity and 96.98% of voting interests immediately after the transactions.
  • SG Broadcasting subordinated convertible note: $6.25 million for working capital and general corporate purposes. The note is payable in kind through maturity, matures six months after the fifth anniversary, and is convertible beginning six months after issuance.
  • Emmis convertible promissory note: $5.0 million, with a five-year maturity and conversion rights beginning six months after issuance.
  • Management fee: $1.25 million annually, payable monthly to Emmis Operating Company, plus reimbursement of specified expenses.
  • The filing text does not provide clear values for revenue, net income, operating cash flow, free cash flow, cash balances, liquidity, margins, or EBITDA.

Material Changes Versus the Prior Comparable Period

  • MediaCo was separated from Emmis and assumed ownership and operation of WQHT-FM and WBLS-FM, together with associated assets and liabilities.
  • The company issued 1,666,667 Class A shares to Emmis and 5,359,753 Class B shares to SG Broadcasting in private transactions under Section 4(a)(2) of the Securities Act.
  • MediaCo entered into a senior secured credit facility and two convertible promissory notes, creating substantial new indebtedness and potential future equity dilution.
  • The board expanded from one to seven directors and appointed six additional directors.
  • The fiscal year-end changed from the last day of February to December 31.

Guidance, Outlook, Risks, Contingencies, and Unusual Items

  • Emmis expected to distribute all MediaCo Class A shares pro rata to its shareholders of record on January 3, 2020, with the distribution expected on January 17, 2020. Regular-way trading was expected to begin January 18, 2020 under the symbol MDIA, subject to applicable conditions.
  • The senior credit facility includes restrictions on additional indebtedness, dividends, minimum liquidity, collateral maintenance, and minimum fixed-charge coverage. The filing does not provide the specific covenant thresholds.
  • The notes carry variable or escalating interest provisions and are convertible into Class A shares based on the 30-day volume-weighted average share price at conversion, creating refinancing, interest-rate, and dilution risks.
  • Emmis Operating Company will provide leased personnel, station management, financial reporting, SEC compliance, and related services. These related-party arrangements may affect operating costs and governance.
  • The transaction agreement includes conditions, termination rights, releases, and indemnification provisions. Emmis’ responsibility for certain breaches is generally subject to a one-percent loss threshold and a recovery cap of 10% of the purchase price, except in limited circumstances.
  • Management cautioned that forward-looking statements are subject to risks described in the company’s SEC filings and undertook no general obligation to update them.

Most Important Facts to Verify

  1. Whether the planned January 2020 distribution and Nasdaq listing occurred on the expected dates.
  2. The company’s opening balance sheet, cash position, liquidity, and covenant compliance after the separation.
  3. Actual revenue, profitability, cash flow, and operating results for the transition period ended December 31, 2019.
  4. The final terms, interest rates, amortization requirements, and covenant thresholds under the senior credit facility.
  5. Potential dilution from the Emmis and SG Broadcasting convertible notes and the related-party management and services agreements.