Comments on: Psst! Wanna Buy A Media Company Cheap?

By: Urr wrong umm yeah

Urr wrong umm yeah — Mon, 04 Aug 2008 15:41:22 +0000

Verizon Information Services spun off the yellow pages division to become Idearc Media in 2007. With it came a VERIZON DEBT of 9 Billion $. Not Idearc’s but Verizon’s.

By: umm yeah

umm yeah — Fri, 18 Jul 2008 21:52:30 +0000

i just looked ur rite zero debt…maybe an interesting value play, but with decling rev, that means overhead needs to be reduced which means less meaningful content, etc…u know the game. there may be a value there tho, tough to say.

By: Wick Allison

Wick Allison — Fri, 18 Jul 2008 21:12:41 +0000

ummm yeah, A.H. Belo has no debt. You must have looked at Belo, the broadcasting company, which does. As for Idearc, the free cash flow is after debt service.

By: umm yeah 2

umm yeah 2 — Fri, 18 Jul 2008 19:21:43 +0000

Idearc spun off from Verizon with $9 billion (with a b) in debt.

By: umm yeah

umm yeah — Fri, 18 Jul 2008 19:02:56 +0000

i’m just guessing but buying a company typically includes assuming the debt the company currently carries…because i am lazy and don’t feel like looking it up…i would image the debt load for both of these companies is quite large. quick ex:

Belo mkt cap is $256M

Free Cash Flow is $256M

Total Debt is $1B (annual payments are $100M note is due in 5 yrs)

So u buy a company with rapidly declining cash flow for $256M…you collect the Cash flow yr 1 and payoff the loan…but you have also assumed $1B in debt that matures in 5 yrs…although the annual pmt on the debt is only $100M…if cash flow continues to decline at the current rate by yr 3 you are going to have a bunch of debt remaining and no cash flow to pay it off.

Wick / DCM – get it, got it, muy bien!!

By: DKC

DKC — Fri, 18 Jul 2008 18:38:00 +0000

Wick: “If you and I borrowed $256 million today, bought the company, paid off our loan”
You didn’t get it for free, you had to borrow the money AND pay it back. I am assuming you will use the proceeds of the sale to pay back the loan. If someone forgives your loan…then yes your are getting it for free.

By: microdermer

microdermer — Fri, 18 Jul 2008 18:17:44 +0000

I think you have hit on a good point, Wick. The Wall St. guys are looking for long term growth oopportunities, not sucking the remaining marrow out of those declining revenue bones.

It would be interesting to see how far the revenue stream of those two companies has to fall before you go negative cash flowing?

By: Wick Allison

Wick Allison — Fri, 18 Jul 2008 18:02:12 +0000

DKC: “when you go to sell the POS you will probably end up selling it for much less than the entire cash flow you received” Are you being obtuse or is it me? So what if you sell it for less? You bought it for nothing. Whatever you sell it for is free money.

By: DM

DM — Fri, 18 Jul 2008 17:19:08 +0000

Plus, you get the Cue Cat!

Someone call Cuban stat!

By: DKC

DKC — Fri, 18 Jul 2008 16:41:24 +0000

Wick: You will get the free cash flow; however, when you go to sell the POS you will probably end up selling it for much less than the entire cash flow you received.

Oh well…Who am I to stand in the way of capitalism. With Obama approaching fast in the rearview mirror, we better take advantage of capitalism before it is wiped out as we now know it.