Johnston Press, one of the largest local and regional media groups in the UK, has launched a £220 million ($372.9 million; €268.2 million) high yield bond offering as part of a wider £360 million refinancing, the firm announced on Friday.
The senior secured fixed rate notes are due to mature in 2019. A revolving credit facility of £25 million due 2018, is also part of the new plan, as well as a £140 million share issue, which placed on Friday.
JP Morgan, Credit Suisse and Lloyds were bookrunners on the bond issue. S&P assigned a preliminary rating of B to the issuer Johnston Press Bond, a financing-only subsidiary of Johnston Press. It assigned a negative outlook based on its summation that the company may not be able to halt the ongoing decline in advertising revenues.
“Under the new capital structure, Johnston Press’ debt-to EBITDA ratio will remain above 5x, which characterises a “highly leveraged” financial risk profile,” S&P said.
Moody’s assigned a provisional B3 rating on the bonds saying it reflected “the fairly limited size and scope of the company’s operations and vulnerability of majority of its revenues to the cyclical nature of advertising spending.” However, among the risk mitigants, good free cash flow generation was expected from 2015 onwards, which should help with deleveraging, it said. At closing of the refinancing transaction, Moody’s assessed the debt-to-EBITDA ratio at 4.8x on a 2013 pro-forma basis.
Johnston Press’ plan aims to accelerate the deleveraging of the group’s balance sheet and extend the maturity profile of Johnston Press’ financing arrangements, by replacing and refinancing the existing lending facilities of £207 million and private placement notes of £107 million. Both are understood to include PIKs.
Ashley Highfield, chief executive, said in a statement, that 2013 marked “a return to underlying operating profit growth for the first time in seven years.”
The firm said it hopes to re-invest any surplus cash it can generate from its plan to grow its digital presence. It also announced an agreement with Sky broadcasting group. Last month, the group agreed to sell its Irish operations.
Rothschild is acting as financial advisor on the refinancing.