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Spanish Broadcasting System Inc. Message Board

  • value_invstr value_invstr Jan 31, 2012 10:55 AM Flag

    The Refi and what it means

    No doubt this is excellent news for SBSA shareholders. This takes the $0 out of the equation for a long period of time. Worst case scenario has been avoided. However, the company has a lot of work to do. The deal is $275M and Goldman is killing them with fees, $25M, which seems very high to me. Given where this deal is going to price, annual interest payments is going to increase from around $12M to around $38M. This increase will eat up FCF. They will currently be slightly FCF positive. The story know is SBSA needs to grow. Instead of a $43M Ebitda company, they need to get to $50M, then $60M. They can do it, but they will have to execute and the economy will have to cooperate. This deal buys them a lot of time. The next step will be to workout a deal with the preferred shareholders. Don't be surprised if the common gets diluted as a result, but the preferred holders aren't in a position of strength given the amount of Secured Debt in front of them. $10-$15 is not out of the question given the option value the stock has. The deal extends the life of the option, making it much more valuable. There won't be any FCF returned to shareholders until the Preferred is dealt with. Ideally the company grows, deals with the preferred, and then refinances this deal to get a better rate, and then returns cash to shareholders. That's the plan now, but $0 has been avoided for now.

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    • Paying that high of an interest rate and fee seems ridiculous to me. When you talk about the preferred shares, I remind you that Mr. Alarcon owns 100% of the Class B shares and and the 380K of the Class C shares is owned by CBS. I would rather them sell off at least one or two radio stations and reduce half the principal amount of the maturity. Do you know why they are seeking a private placement deal to finance the debt instead of raising it in the capital markets? Are there benefits to that?

      • 1 Reply to madhandle16
      • I didn't see if the deal had RegS rights or not. Doing it private allows you do a deal faster, and often allows you to bipass some registeration requirements. Maybe they are doing it to avoid conference calls. Overall, it doesn't really matter. They could sell some Assets, but don't be surprised if they go the other way and acquire assets. If you can keep them cheap enough, you can de-lever through acquisitions. Some of the TV Broadcasters did it during the financial crisis. They were buying stations at 5x, when they were levered 7x. Helped them comply with covenants. Regardless the name of the game is FCF for these guys. Have to generate more, but they bought themselves some time.

    • What deal - when was this complete as I do not see anything anywhere?

    • very well stated.

 
SBSA
3.41-0.21(-5.93%)Feb 26 3:53 PMEST

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