McClatchy completed a junior lien loan agreement with Chatham Asset Management for a total of $350.6 million. The publishing company also terminated its $65 million ABL facility with Bank of America and entered into a new $65 million revolver with Wells Fargo.
The term loan agreement provides for two tranches of term loans, tranche A in the aggregate principal amount of $157.1 million and tranche B in the aggregate principal amount of $193.5 million. The tranche A term loan accrues interest at a rate of 7.795% per year and matures on July 15, 2030, while the tranche B term loan accrues interest at a rate of 6.875% per annum and matures on July 15, 2031. The liens securing the collateral for the term loans are subordinated to the liens in the 2026 Notes and the asset-based lending credit facility agreement discussed below.
The proceeds of the tranche A loans were used to effect the exchange with Chatham of $82.1 million principal amount of 7.15% unsecured debentures due 2027 and cash that was used to pay down 2022 Notes and to pay certain fees and expenses in connection with the refinancing transactions. The proceeds of the tranche B loans were used to effect the exchange with Chatham of $193.5 million of the company’s 6.875% unsecured debentures due 2029.
In connection with the issuance of the 2026 notes and the term loan agreement, the company terminated its $65 million revolving credit agreement with Bank of America and other lenders and entered into a $65 million ABL credit facility with Wells Fargo. Availability under the ABL is subject to a borrowing base comprised of eligible receivables and eligible inventory. As of the end of the second quarter, proforma for the refinancing, the company had approximately $47.5 million of total borrowing base capacity under the ABL facility, of which $10 million was drawn at the time of closing. Also, proforma for the refinancing, the company’s first lien leverage ratio based on EBITDA, as defined in the indenture, was 2.0 times EBITDA, and its total leverage ratio was 4.9 times EBITDA.
The principal agreements for the refinancing will be filed as exhibits to the company’s second quarter Form 10-Q, which is expected to be filed by August 10, 2018.
Craig Forman, McClatchy’s president and CEO, said, “In the 2018 second quarter, newspaper-industry headwinds continued but nonetheless our digital transformation progressed despite these industry challenges. We saw many areas of sequential improvement: our total digital advertising revenues were up almost 8%, while our digital-only advertising revenues grew more than 20%.
“We ended the quarter with 122,400 digital-only subscribers, up 34.5% from the same period in 2017, an accelerated pace of growth from the first quarter. We continue to be excited about our digital future and to invest in the growth engines of our business.”
Sacramento, CA-based McClatchy operates 30 media companies in 14 states, providing each of its communities with strong independent local journalism in the public interest and advertising services in a wide array of digital and print formats. McClatchy publishes iconic local brands including the Miami Herald, The Kansas City Star, The Sacramento Bee, The Charlotte Observer, The (Raleigh) News & Observer and the (Fort Worth) Star-Telegram.
