Nexstar Prices $900 Million In Senior Notes

Nexstar Broadcasting Group on Wednesday announced its intent to raise $900 million through 5.625% new senior notes due 2024. It said the sale of the notes is expected to be completed on or about July 27, subject to customary closing conditions.

On Jan. 27, Nexstar and Media General entered into a definitive merger agreement whereby Nexstar will acquire all outstanding shares of Media General. Nexstar said it intends to use the net proceeds from the proposed offering, together with borrowings under future secured indebtedness, cash proceeds from the divestiture of certain assets and the issuance of new common stock (pursuant to the exchange ratio disclosed at the time of the announcement of the merger agreement), to fund its proposed acquisition of Media General, to repay existing Nexstar credit facilities, to repay existing Media General indebtedness and to pay other fees and expenses related to Nexstar’s acquisition of Media General and the related refinancing.

Following announcement of the notes, Wells Fargo senior analyst Marci Ryvicker commented: “The notes will be raised by an escrow issuer in a separate account until certain release conditions are met (we assume these conditions all relate to receiving regulatory approval for the Media General deal). While there is no pricing information in the release (this is standard given the notes have not been yet placed) our expectations given market conditions are for the rate to be in the high 5% to low 6% range.

“Simultaneously, the company provided new pro-forma information for 2015 and Q1 ’16 which incorporates recent station divestitures related to the MEG deal. At first glance, all of these figures look relatively in-line with management’s public commentary. On 2015 figures, approximately $118 million of revenue and $46 million of broadcast cash flow (BCF) were divested (recall, management previously announced the divestitures combined to provide $49 million of 2014-15 average BCF).

“We view this debt raise as a positive catalyst for the stock as it illustrates management’s commitment to financing this transaction. We also remind you that depending on where the final rate comes out, that there could be about $1 of upside to the company’s initial $11.15 blended PF FCF/share guide (which assumed a higher interest rate).”