Gray closes Hoak deal; completes refinancing

By on Jun, 13 2014 with Comments 0

Gray-TelevisionGray Television has completed its buy of 12 stations and programming of three additional television stations from Hoak Media and Parker Broadcasting. In addition, Gray completed the refinancing of its senior credit facility, which now consists of a seven-year $525 million term loan facility and a five-year $50 million revolving credit facility. 

The proceeds from the term loan were used primarily to complete the Hoak Acquisition for approximately $306 million including working capital adjustments and to refinance $159 million outstanding under our previously existing term loan, pay transaction fees and expenses, and for other general corporate purposes.  Gray did not draw any amounts under the refinanced revolving credit facility.

The stations include:

STATION  AFFILIATION  MARKET  MARKET RANK
KSFY ABC Sioux Falls, SD

111

KABY* ABC Sioux Falls, SD

111

KPRY* ABC Sioux Falls, SD

111

KVLY NBC Fargo-Valley City, ND

116

KNOE CBS Monroe- El Dorado, LA

137

KFYR NBC Minot-Bismarck-Dickinson, ND

145

KMOT* NBC Minot-Bismarck-Dickinson, ND

145

KUMV* NBC Minot-Bismarck-Dickinson, ND

145

KQCD* NBC Minot-Bismarck-Dickinson, ND

145

KALB NBC/CBS Alexandria, LA

179

KNOP NBC North Platte, NE

208

KIIT-LP FOX North Platte, NE

208

* satellite station

 

When announcing the Hoak Acquisition on 11/20/13, Gray reported that Excalibur Broadcasting would acquire five stations in existing or future Gray markets from Hoak, Parker, and Prime Cities Broadcasting, and that Gray would operate these stations through shared services agreements.  As a result of new FCC policies announced 3/31 and imposed after the parties entered into those agreements, Excalibur and its counter-parties have abandoned those transactions.

Nevertheless, Gray has secured alternative agreements with Hoak, Parker, and Prime Cities whereby Gray will be able to attain the economic benefits sought in the original set of agreements.  In particular:

— KHAS-TV, Lincoln-Hastings, Nebraska:  On 6/12, KHAS-TV ceased broadcasting.  This morning, Hoak transferred to Gray all of the station’s affiliation, programming, and operational agreements, as well as its tower, studio, and other tangible and intangible assets other than its FCC license and transmission equipment.  At the same time, Gray hired KHAS-TV’s employees.  To preserve and expand NBC programming in the market, Gray launched a new “NBC Nebraska” service on the primary channel of one of its own stations in the Lincoln-Hastings, Nebraska market, KSNB-TV.  To accommodate the new NBC service on KSNB-TV’s primary channel, Gray moved the station’s pre-existing program line-up consisting of MeTV Network, My Network, local news and other programming to KSNB-TV’s channel 4.2.

–KNDX-TV/KXND-TV, Minot-Bismarck, North Dakota:  Last month, Gray announced that it had acquired certain assets associated with KNDX-TV and KXND-TV, the Prime Cities stations operating as the Fox affiliate for the Minot-Bismarck, North Dakota market.  On 6/12, Prime Cities ceased broadcasting KNDX-TV in Bismarck and KXND-TV in Minot.  Prime Cities, however, continued regular broadcasts on its low power stations in the Minot-Bismarck market, which are operated by Gray pursuant to a local marketing agreement until Gray completes its acquisition of the licenses of these low power stations.

On 6/13, KFYR-TV and the other NBC affiliated stations acquired by Gray in the Minot-Bismarck market began simulcasting the signals of the low power stations on their multicast channels.  Consequently, the Fox and other programming previously offered by Prime Cities are now available from the Gray-owned and NBC affiliated stations in the market.  The Fox operation will continue to be known as “KNDX” and “Western Dakota Fox.”

— KXJB-TV (CBS) Fargo, North Dakota, and KAQY-TV (ABC), Monroe, Louisiana.  As a result of the Hoak Acquisition, Gray assumed essentially all of Hoak’s contracts.  Included in those contracts were Hoak’s rights to provide back-office services and limited programming to Parker’s KXJB-TV and KAQY-TV through the former Hoak (now Gray) television stations located in Fargo and Monroe, respectively.

Gray has now closed on all previously announced transactions, other than its proposed acquisition of three television stations in Montana for approximately $2.0 million announced on May 7, 2014.  (Gray operates two of these stations through a pre-closing local marketing agreement and sells advertising for the third station through a pre-existing joint sales agreement.)  Including these Montana television stations,

Gray now owns and/or operates television stations in 42 television markets broadcasting 139 program streams including 75 affiliates of the Big Four networks (ABC, CBS, NBC and FOX).  We own and/or operate the number-one ranked television station in 28 of those 42 markets and the number-one or number-two ranked television station operations in 38 of those 42 markets.

Wells Fargo Securities served as financial advisor and Cooley LLP served as primary legal counsel for Gray on the Hoak transactions.

Frank Montero-11
Said Francisco Montero, Managing Partner, Fletcher, Heald & Hildreth, P.L.C. : “The FCC’s TV multiple ownership rules focus on “attributable” interests in full power TV licenses. Decades ago, attribution originally meant ownership and control above a given threshold. Then in the 90s broadcasters developed time brokerage arrangements, but the FCC made TBAs attributable, then broadcasters structured transactions involving combinations of debt, non-controlling equity and programming and the FCC developed the “debt-equity plus rule”, then broadcasters looked to JSAs but now the FCC has made those attributable. But the focus remains counting FCC licenses in full power TV .  Low Power TV stations are not covered by the FCC’s multiple ownership rules and neither are digital multicast channels which are covered by the same FCC license as the primary channel. So if you can migrate operations and programming to an LPTV or a digital multicast channel and the seller’s full power license is not transferred or even utilized and just turned off or turned in, then the multiple ownership rules should not be implicated.”

Marci-Ryvicker
Noted Marci Ryvicker, Wells Fargo Securities Senior Analyst: “GTN announced Friday (6/13), that it has completed its acquisition of Hoak. Recall that in the original deal (announced 11/20/13), GTN was going to acquire 12 stations and operate an additional 5 under SSAs with Excalibur. However, the deal has been restructured. Specifically, Excalibur has abandoned the transaction and GTN has moved programming from 3 of those stations to its sub-channels. The new structure can be broken up into 3 parts: 1) KHAS-TV in Lincoln-Hastings, Nebraska (NBC; DMA: 105) and KNDX-TV/KXND-TV in Minot-Bismarck, North Dakota (FOX; DMA: 145) have ceased broadcasting and have either transferred all programming to GTN or will be simulcast on one of GTN’s sub-channels. GTN has also hired KHAS-TV’s employees. 2) GTN has assumed all of Hoak’s contracts for KXJB-TV in Fargo, North Dakota (CBS; DMA: 117) and KAQY-TV in Monroe, Louisiana (ABC; DMA: 137) and will provide certain services to those stations. Along with KJCT-TV in Grand Junction, CO (ABC; DMA: 185 – already owned by Excalibur and not a part of the Hoak deal), GTN plans to eventually transition the programming from those stations to its digital sub-channels – pending approval from the affiliated networks and other stakeholders. 4) The current owners of all 6 stations have provided GTN with a right to acquire the FCC licenses and transmission equipment. GTN has retained MMTC (Minority Media and Telecommunications Council) to broker a transfer of licenses to a non-profit or minority owner under certain rules.
All the economics of the original deal have been preserved. In the event of a new owner for the 6 stations mentioned previously, GTN will be reimbursed for expenses associated with the sale and will retain the programming. GTN also completed the refinancing of its senior credit facility, which now consists of a 7-year $525MM TL and a 5-year $50MM revolver.
Bottom line: We are pleased to see Hoak close and would expect additional announcements across the space as the FCC works through deals.”

 

 

 

About The Author: Carl has been with RBR-TVBR since 1997 and is currently Managing Director/Senior Editor. Residing in Northern Virginia, he covers the business of broadcasting, advertising, programming, new media and engineering. He’s also done a great deal of interviews for the company and handles our ever-growing stable of bylined columnists.

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