The date of the reduction from 102% to 101% in the percentage of principal at which the 2nd lien term loan can be redeemed being only about one month from now (01/31/2014) is a strong incentive to wait a little longer to redeem any of that loan.
The interest rate on any refinancing of the New Pulitzer Notes with someone not currently holding them would have to be somewhat attractive to make up in interest savings through maturity the 5% redemption premium.
Is the company considering borrowing in Europe?
from the 10-K:
In January 2012, we entered into a second lien term loan (the “2nd Lien Agreement”) with a syndicate of lenders (the “2nd Lien Lenders”). The 2nd Lien Agreement consists of a term loan of $175,000,000.
The 2nd Lien Agreement bears interest at 15.0%, payable quarterly.
The 2nd Lien Agreement requires no principal amortization, except in March 2017 if required for income tax purposes.
From January 30, 2013 until January 30, 2014, the 2nd Lien Agreement may be redeemed at 102% of the principal amount, at 101% thereafter until January 30, 2015 and at 100% thereafter until the April 2017 final maturity. Terms of the 1st Lien Agreement also restrict principal payments under the 2nd Lien Agreement.
In May 2013, we refinanced the $94,000,000 remaining balance of the Pulitzer Notes (the “New Pulitzer Notes”) with BH Finance LLC ("Berkshire") a subsidiary of Berkshire Hathaway Inc. The New Pulitzer Notes bear interest at a fixed rate of 9.0%, payable quarterly. Pulitzer is a co-borrower under the the New Pulitzer Notes, which eliminates the former Guaranty Agreement made by Pulitzer under the Pulitzer Notes.
At September 29, 2013, the balance of the New Pulitzer Notes is $63,000,000. We may voluntarily prepay principal amounts outstanding under the New Pulitzer Notes at any time, in whole or in part, without premium or penalty (except as noted below), upon proper notice, and subject to certain limitations as to minimum amounts of prepayments. The New Pulitzer Notes provide for mandatory scheduled prepayments totaling $6,400,000 annually, beginning in 2014.
The New Pulitzer Notes are subject to a 5% redemption premium if 100% of the remaining balance of the New Pulitzer Notes is again refinanced by lenders, the majority of which are not holders of the New Pulitzer Notes at the time of such refinancing. This redemption premium is not otherwise applicable to any of the types of payments noted above.
It is so much better to have insiders selling in offerings at prices greater than those at which the company first offered shares. The reason? Insider selling does not dilute the shareholders!
Some "haircut" this is!
"Climb every mountain,
Swim every sea,
No price is too great
To pay for chuuuuuuuuuuy!"
Dear Members of the Board of Directors:
As was disclosed in a Schedule 13D filed on November 1, 2013, Lonestar Partners, L.P., an investment fund advised by Lonestar Capital Management LLC (together, “Lonestar”), owns 3.0 million shares of common stock of Lee Enterprises, Incorporated (“Lee,” or the “Company”). Lonestar commends the Company’s management for generating stable EBITDA and cash flow in a difficult industry environment. The Company’s advertising sales efforts, digital initiatives and ongoing cost reductions have allowed Lee to deleverage at a rapid rate. Lonestar believes that Lee’s prospect for further deleveraging is bright because
*** blah blah blah, and then, finally ***
We believe that the Company should be able to raise $650 to $700 million of true first lien. Given this, we feel that the Company should pursue a financing alternative that includes raising a minimum of $125 million of subordinate interests, with the expectation that this subordinated financing could be achieved concurrently with a refinancing of the existing 1st Lien Agreement. We continue to believe that the Company and its financial advisors would be successful in raising such financing.
We ask the directors of the Company to use the current window of accommodative capital market conditions to refinance its entire capital structure in a way that reduces cash interest expense and rationalizes collateral arrangements. Doing so will maximize value fully for all shareholders.
Lonestar Capital Management LLC
*** Just 'cuz they want interest expense to be lower doesn't mean it will happen. ***
The share price may be relevant now if the company is going to sell equity. Would it be 400M shares at $1.875 or 375M shares at $2, for example?