Gray Announces Closing of Offering of $1.25 Billion of 10.500% Senior Secured First Lien Notes due 2029

Rhea-AI Summary

Gray Television (NYSE: GTN) has closed its $1.25 billion offering of 10.500% senior secured first lien notes due 2029. These notes, issued at par, will help pre-pay Gray's $1.2 billion term loan due January 2026, repurchase outstanding 5.875% senior notes due 2026, and cover associated fees and expenses. The notes are guaranteed by Gray's existing and future restricted subsidiaries. Interest on the notes begins accruing from June 3, 2024, and is payable semiannually starting January 15, 2025. The notes mature on July 15, 2029, and were offered only to qualified institutional buyers and persons outside the U.S.

Positive

• Successfully raised $1.25 billion through the issuance of senior secured first lien notes.
• The notes have a high-interest rate of 10.500%, which could attract strong investor interest.
• The proceeds will pre-pay $1.2 billion of debt and repurchase outstanding notes, potentially reducing future interest expenses.
• The notes are guaranteed by existing and future restricted subsidiaries, providing additional security for investors.

Negative

• The high-interest rate of 10.500% increases the company's cost of borrowing.
• Issuing new debt could increase the overall debt burden, affecting financial flexibility.
• The notes are not registered under the Securities Act of 1933, limiting their marketability.

Insights

Financial Analyst

Gray Television's decision to issue $1.25 billion in senior secured first lien notes with a 10.5% interest rate is a significant financial maneuver. The steep interest rate reflects the current high-cost environment for borrowing, which is impacted by broader economic conditions. This move effectively pushes the company's debt maturity from 2026 to 2029, providing more time to improve cash flow and stabilize financials.

However, the 10.5% interest rate is substantially higher than the 5.875% rate of the notes being repaid, indicating an increase in the company's cost of debt. This could impact its profitability in the short term, but the extended maturity alleviates near-term liquidity pressure. Critical to watch will be Gray's ability to manage and service this costlier debt without hampering operations or growth plans.

Investors should also consider the company's strategic use of proceeds to eliminate existing debt and improve its debt maturity profile. While beneficial for liquidity, the move also implies confidence in Gray's ability to generate stable cash flows in the future.

Credit Rating Analyst

From a credit rating perspective, the issuance of senior secured notes is underpinned by the guarantees from Gray's restricted subsidiaries, which offer additional security to investors. The 10.5% interest rate suggests that the current credit market views Gray as a higher-risk borrower compared to its previous bond issuance at 5.875%. This can be due to either internal financial instability or external market conditions.

Key factors to monitor include Gray's ability to meet interest payments reliably and manage the increased debt burden. The move to repurchase the older, lower-interest notes indicates proactive financial management, yet it will be important to see if this action leads to improved credit ratings or if the higher interest costs negate these benefits.

Credit rating agencies might hold a cautious outlook due to the substantial increase in borrowing costs, but the extended maturity profile and comprehensive guarantees could provide a stabilizing effect.

Atlanta, June 03, 2024 (GLOBE NEWSWIRE) -- Gray Television, Inc. (“Gray”) (NYSE: GTN) announced today that it has completed its previously announced offering of $1.25 billion aggregate principal amount of 10.500% senior secured first lien notes due 2029 (the “Notes”). The Notes were issued at par.

The net proceeds from the Notes are being used, together with the net proceeds of up to $500 million of a new tranche F term loan and availability under its revolving credit facility, both under the Company’s Senior Credit Facility, and cash on hand, to pre-pay Gray’s $1.2 billion tranche E term loan due January 2, 2026 under the Company’s Senior Credit Facility; repurchase in a tender offer any and all of its outstanding 5.875% senior notes due 2026; and pay all fees and expenses in connection with the offering.

The Notes are guaranteed, jointly and severally, by each existing and future restricted subsidiary of Gray that guarantees Gray’s existing senior credit facility.

Interest on the Notes accrues from June 3, 2024 and is payable semiannually, on January 15 and July 15 of each year, commencing January 15, 2025. The Notes mature on July 15, 2029.

The Notes and related guarantees have not been, and will not be, registered under the Securities Act of 1933 or the securities laws of any other jurisdiction and may not be offered or sold in the United States absent registration or an applicable exemption therefrom. The Notes were offered only to persons reasonably believed to be qualified institutional buyers under Rule 144A and to persons outside the United States under Regulation S.

Forward-Looking Statements:

This press release contains certain forward-looking statements that are based largely on Gray’s current expectations and reflect various estimates and assumptions by Gray. These statements are statements other than those of historical fact and may be identified by words such as “estimates,” “expect,” “anticipate,” “will,” “implied,” “intend,” “assume” and similar expressions. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond Gray’s control, include Gray’s ability to consummate the senior credit facility refinancing or the tender offer; the intended use of proceeds of the offering and the senior credit facility refinancing; and other future events. Gray is subject to additional risks and uncertainties described in Gray’s quarterly and annual reports filed with the Securities and Exchange Commission from time to time, including in the “Risk Factors,” and management’s discussion and analysis of financial condition and results of operations sections contained therein, which reports are made publicly available via its website, www.gray.tv. Any forward-looking statements in this communication should be evaluated in light of these important risk factors. This press release reflects management’s views as of the date hereof. Except to the extent required by applicable law, Gray undertakes no obligation to update or revise any information contained in this communication beyond the date hereof, whether as a result of new information, future events or otherwise.

Gray Contacts:
Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Jeff Gignac, Executive Vice President, Finance, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

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FAQ

What is Gray Television's GTN recent debt offering?

Gray Television closed a $1.25 billion offering of 10.500% senior secured first lien notes due 2029.

What will Gray Television use the proceeds from the notes for?

The proceeds will be used to pre-pay a $1.2 billion term loan, repurchase outstanding 5.875% notes due 2026, and cover fees and expenses.

When will interest on Gray Television's new notes start accruing?

Interest will start accruing from June 3, 2024, and is payable semiannually on January 15 and July 15, starting January 15, 2025.

When do Gray Television's new notes mature?

The notes mature on July 15, 2029.

Are Gray Television's new notes registered?

No, the notes are not registered under the Securities Act of 1933 or any other jurisdiction's securities laws and are offered only to qualified institutional buyers and persons outside the U.S.