Media General Inc. said Friday that it has reached an agreement with Bank of America Corp. and other lenders for a short-term bridge amendment for its credit agreement.
The company, which owns the Winston-Salem Journal, described the amendment as "the first step in the refinancing process."
"We're pleased that our lender group waived the technical issues under our existing credit agreement," said James Woodward, chief financial officer of Media General.
"Their doing so provides the time and flexibility needed to continue our constructive dialogue on an amend-and-extend proposal."
On Jan. 26, Media General said that because of continued economic weakness and the uncertainty of its print business, it "is uncomfortable with its ability to remain in compliance" with its covenants with its lenders.
Media General has $363 million of bank debt due March 29, 2013. Its overall debt as of Dec. 31 was $658 million, down $5 million in the past year.
"We are seeking covenant amendments that would provide more flexibility to operate … and an extension that would provide Media General with time and flexibility to reduce total debt and to refinance," Woodward said.
The bridge amendment resets the leverage ratio during the first quarter of 2012 and waives the deadline of this past Thursday to demonstrate covenant compliance.
Media General agreed to new conditions that included providing a 13-week cash-flow forecast to the lender group, starting by Feb. 29 and every two weeks thereafter.
Raymond Kozakewicz, a corporate spokesman, said the new provision is just for the waiver period. "We have been doing this on a quarterly basis under the terms of our loan agreement," he said.
Investors responded to the amendment by sending Media General's share price down 7 cents to close at $4.71. In the past year, the stock has ranged from $1.14 to $7.73.
Before the agreement was reached, the two main financial covenants would have tightened in 2012 with each succeeding quarter. "This waives the tightness for the first quarter," Kozakewicz said.
Marshall Morton, the company's chief executive and president, told analysts Jan. 26 that the company would consider selling some of its properties as part of a longer-term solution to its debt issues.
Rick Edmonds, a media business analyst for the Poynter Institute, a journalism organization, said the amendment "is a small step in the right direction for Media General, but does not amount to a solution."
"The company needs to get its earnings up. The lender group evidently recognized the revenue advantages 2012 provides on the broadcasting side in agreeing to the amendment."
Morton and Woodward said Media General already is gaining strong revenue from political advertisements in core markets such as Florida and South Carolina. Its eight NBC stations are projected to benefit from advance advertising sales for the Super Bowl and the 2012 Summer Olympics.
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