TV station owner Nexstar Broadcasting on Tuesday priced a $2.75 billion term loan B facility, issued at a price equal to 99.75% of its face value that will bear interest at a rate of LIBOR, plus 3%.
The term loan B facility will also have a 0.0% LIBOR floor and will have a seven-year maturity.
The closing of the term loan B facility is subject to customary closing conditions and the closing of Nexstar’s acquisition of Media General, which is being delayed due to the FCC’s spectrum incentive auction.
Nexstar intends to use the net proceeds from the term loan B facility, along with the previously issued $900 million in aggregate principal amount of 5.625% new senior notes due 2024, cash proceeds from the divestiture of certain assets, and the issuance of new common stock (pursuant to the exchange ratio disclosed at the time of the announcement of the merger agreement), to fund its purchase of Media General.
Nexstar also intends to use the funds to repay existing Nexstar credit facilities, and to pay down debt.
The company says the pricing of the $2.75 billion term loan B facility, combined with the previously issued $900 million senior notes, marks the successful completion of the primary financing components needed to complete the acquisition of Media General.
Additionally, the cost of financing was below Nexstar’s January 2016 estimate.
As a result, interest expense for the combined entity is expected to be approximately $60 million lower annually than the assumptions used in formulating the company’s pro forma guidance for 2016/2017. On a tax-adjusted basis, this is expected to result in approximately $40 million of additional pro forma annual free cash flow.
Reflecting the reduction in anticipated tax-adjusted annual interest expense and identified year one synergies of $76 million, Nexstar now expects to generate over $540 million of average annual free cash flow over the 2016/2017 period.
Pro forma for the completion of the acquisition, the combined entity, to be renamed Nexstar Media Group, is expected to have approximately 47 million shares outstanding.