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Belo Corp. Message Board

  • caminocasa07 caminocasa07 Jun 9, 2011 8:28 PM Flag

    PLAN B

    Given the nature of the financial markets, the domestic
    economy, and the dysfunctional political system which clearly
    is unable to deal with the many challenges out there
    I feel that the implementation of Plan B would be a
    desirable alternative to the current situation.

    There will probably be feel supporters of this within
    the company and on this Board nevertheless---

    PLAN B:

    BLC over the next several months sells enough stations

    (1) Reduce Debt to $240,000,000---
    This would be a term loan 3 points over prime capped at 7%
    7 year schedule monthly payment $3,622,000
    All other debt expunged from the balance sheet

    (2) Pension Plan gets fully funded (this already may
    be the case)--

    (3) We end up with $40,000,000 on the balance
    sheet at end of 2012

    Assuming the above could be accomplished including the
    cash flow from operations in 2011 and 2012 by
    selling 6 stations we would still have 14
    stations to carry on.

    Excess cash flow from remaining stations used to
    repurchase stock and also for new initiatives perhaps
    oriented toward internet advertising, new technologies

    As it stands now, the expected excellent operating
    results over the next eighteen months are already
    priced into the stock (arguably) and the major
    beneficiaries of all this will be the bond holders
    which are receiving the interest and are enjoying the
    security of a much stronger company with much less
    risk on their bond position.

    More work needs to be done on the Plan B and is
    really presented merely as an idea for discussion


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    • Bel Martel

      Thanks for your response(s)

      A lot of issues with Belo
      and overall market at this time--

      Overall weakness in market
      obviously not helpful--

      To the extent that the stock
      market is the "tail that
      wags the dog" for the overall
      U.S. economy---the "negative
      wealth effect" starts to kick in with
      implications for
      consumer spending (2/3 of
      GDP) and also global economy
      (U.S GDP approximaetly 25%
      of Global GDP)

      Regretably we have a Congress
      that cannot work together
      ---hopefully there will be
      some bipartisan support for
      a "bandage" as related to
      debt limit and the budget deficit.

      Best near term hope is that
      oil prices drop significantly
      from current levels giving
      U.S consumer a reprieve.

      In any event in my opinion
      we will continue to be in a
      trading market--I thought I
      heard someone say on CNBC
      that 70% of the stocks that
      are traded are held for less
      than 3 minutes---If true this
      is rather astounding--hedge
      funds momentum players day
      traders etc.

      Thanks again.

    • Well, I applaud your interest in trying to better the company's position, but I disagree. As we sit now we have a company that is generating avg annual Ebitda of $230mm and pays interest expense that is less than $70mm and falling. By my calculations that adds up to an avg of $160mm in pre-tax income for equity holders. Why would you want to sell off stations and pay off low-cost debt holders, deleveraging the company even further? Especially when as you say:

      "the major beneficiaries of all this (cash flow from ops over next 2 years) will be the bond holders which are receiving the interest and are enjoying the security of a much stronger company with much less risk on their bond position."

      Why would you want to help them out some more? Bondholders would love to have the company tender for the bonds and pay them a huge premium. Reducing the size of the company and eliminating leverage only hurts shareholders as FCF/share would drop significantly and the share price would reflect these dynamics.

      I would actually argue that the company is under-leveraged as they pay way too much in cash taxes. By YE 2012, BLC will be leveraged around 3x and is paying cash taxes in the $60-$70mm range. I am sure management agrees and that is the reason they are continually looking at acquisitions - but sellers are demanding multiples that are just too high.

      Absent a sale of the entire company for one of these large multiples, the company should be focusing on leveraging up a bit more - locking in low-cost bank facility with attractive terms - and increasing the dividend.

    • there is currently no plan in place and no plans to go down the path of selling stations. I think they'll execute Plan A which is bank enough cash to pay down the 175M debt that is due in 2013. In 2014 there may be a significant amount of cash generated from the auction of some of our Spectrum. Seattle was named the top market for broadband usage in a survery I saw. Phoenix, Dallas, Houston, and Charlotte are also in the very top tier. We can absolutely exist like we do now after giving up 20% of our spectrum. If the demand is there it would not surprise me to see if we go fishing in those markets.
      I just think for someone looking out 5 years that the value of keeping all our stations, maybe even adding one or two strategic locations, is a far better investment than taking some cash while they are at all time low multiples. Just my two cents, nothing more.