Its Local Media Group owns 17 over-the-air TV stations including WSMV-4 in Nashville and WFSB-3 in Hartford.
But, many people may only know Meredith Corp. as the parent of such female-targeted lifestyle brands and glossy magazines as Better Homes & Gardens, PEOPLE and InStyle.
And, those National Media brands have seen their fair share of challenges, in particular through the novel coronavirus pandemic. As such, Meredith is taking steps to ensure it has a significant amount of cash on hand. It involves a debt raise.
Ahead of Monday’s Opening Bell on the NYSE, Meredith Corp. revealed its intention to raise $710 million in new secured debt.
There’s a reason for the move: getting access to cash by the end of the month.
Specifically, Meredith plans to use a combination of cash on hand and proceeds from the new debt to redeem all of its outstanding Series A preferred stock.
Then, Meredith will pay fees and expenses incurred in connection with the financing and redemption transactions.
Meredith expects to fully redeem the Series A Preferred Stock at a redemption price totaling $722 million, contingent upon raising the new debt.
Concurrently, Meredith has secured an amendment with its revolving line of credit lenders allowing for greater access to its credit facility.
Two key reasons were laid out by Meredith for the moves. First, the company expects to see increased cash savings from the new debt, now tax deductible. This compares to the escalating dividend rate on the current Series A Preferred Stock. Second, the moves give Meredith “additional financial flexibility by eliminating certain covenants required under the Series A Preferred Stock.”
The company expects the new financing and redemption transactions to be completed on or about Tuesday, June 30.
“We believe these steps will create significant benefits for all of our stakeholders as we pursue our previously communicated strategy to ensure ample liquidity and enhance our financial flexibility,” Meredith President/CEO Tom Harty said.
Come next Tuesday, Meredith expects to have $165 million in cash on hand, excluding the impact of the transactions, and a zero balance on its revolving line of credit.
By comparison, at the end of the first quarter Meredith had cash and cash equivalents of $103 million, along with $35 million drawn on its $350 million revolving line of credit.
The $35 million was repaid on June 4.
REVOLVING AMENDMENT
Monday also saw Meredith enter into an amendment to its revolving line of credit facility, conditioned on the redemption of the Series A Preferred Stock. It provides for “Covenant Relief Period” through March 31, 2022, during which the company will have greater access to borrowings under the facility by increasing the consolidated net leverage ratio financial covenant initially from 4.25x to 6.0x before stepping down in several increments to 5.0x.
The financial covenant only applies when Meredith’s borrowings under the facility exceed 30% of the amount available under the facility.
Investors reacted positively to Meredith’s plan to have more cash at hand, with MDP finishing up 2.2% to $15.62 before slipping by a penny in immediate after-hours trading. Meredith’s COVID-19 fueled low came April 2, with a $10.81 close. It’s struggling to return to a year-to-date high of $34.90 seen February 6, just as the novel coronavirus was getting attention in Southeast Asia.
