October 28, 2013 / 1:54 PM / 6 years ago

RLPC: Tribune drives up M&A loan volume with $4.1B credit

NEW YORK, Oct 28 (Reuters) - Media company Tribune Co is launching a $4.1 billion credit via a lender meeting at 11 a.m. Thursday, sources told Thomson Reuters LPC. JP Morgan is lead left on the new credit, which backs Tribune’s acquisition of Local TV and refinances existing Tribune debt.

Bank of America Merrill Lynch, Citigroup, Deutsche Bank and Credit Suisse are also lead arrangers on the deal, according to a company press release.

The new credit is split between a $300 million, five-year revolver and a $3.8 billion seven-year term loan.

On July 1, Tribune Company and Local TV Holdings LLC jointly announced an agreement for Tribune to acquire all of Local TV’s 19 television stations in 16 markets for $2.725 billion in cash. Tribune expects to finance the transaction with new debt and cash on hand.

Local TV is currently principally owned by Oak Hill Capital Partners.

Upon closing, Tribune will be the country’s largest commercial television station owner, with a total of 42 stations. The transaction will be immediately accretive to Tribune’s earnings, according to the company release.

The large transaction breathes life into a slowed pipeline for debt-financed mergers and acquisitions, following the close of big ticket LBO/M&A loan deals from Neiman Marcus, Dell, Activision Blizzard, and Saks Inc over the past two months.

Fixed income investors have faced headwinds from the government shutdown and Fed tapering concerns, but now are anxious for more deals in the pipeline.

“The market definitely needs more paper,” said one loan investor.

“We have a lot of dry powder for loan product,” added another investor.

Investors now eagerly await new Tribune credit ratings to gauge participation in the deal, according to some institutional loan market participants. Buyside sources initially said that they are pleased with Tribune’s shift in focus to broadcasting, under the leadership of President and CEO Peter Liguori.

On July 10, Tribune announced the intent to separate the company’s broadcast and publishing businesses via a spin-off of Tribune’s publishing assets to an independent company, and the tax-free distribution of shares in that company to Tribune stockholders.

The spin-off Tribune Publishing Company is expected to house Tribune’s publishing assets, including the Los Angeles Times, Chicago Tribune, The Baltimore Sun, and the Orlando Sentinel.

The new Tribune Company is expected to be home to the company’s other principal businesses, including the pro forma 42 local television stations in 33 markets following the Local TV acquisition. Tribune Company will also include WGN Radio, Tribune Studios, Tribune Digital Ventures, CareerBuilder, The TV Food Network, and Tribune’s portfolio of real estate assets.

Tribune caused sleepless nights for many fixed income investors during 2006 and 2007, when the company dropped from investment grade to high yield ratings on secular declines in print media advertising, and the company was taken over via a leveraged buyout led by Sam Zell that saddled the company with roughly $13 billion of debt.

Tribune filed for bankruptcy protection on December 8, 2008. The company announced the successful emergence from bankruptcy on December 31, 2012.

In connection with the emergence, Tribune priced a $300 million, five-year asset-based lending revolver and a $1.1 billion, covenant-lite seven-year exit term loan backing distributions to creditors in accordance with Tribune’s Plan of Reorganization. The term loan priced at 300bp over Libor, with a 1 percent Libor floor, and a 99 original issue discount. That loan reverse flexed during syndication.

The Chicago Tribune was first published in 1847 and served as the foundation for what would later become Tribune Company.

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