For those of you keeping score at home, here is the covenant provision in its new lending agreement that spells out the company’s required performance (p. 67):
a) Minimum Adjusted EBITDA. The Borrowers shall have Adjusted EBITDA, determined for each period specified below, in an amount not less than the amount specified for such period as follows (amounts in parenthesis indicate negative (deficit) amounts):
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6 months ending March 31, 2009:
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$ | (4,000,000 | ) | |
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9 months ending June 30, 2009:
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$ | 6,500,000 | ||
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12 months ending September 30, 2009:
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$ | 15,000,000 | ||
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12 months ending December 31, 2009:
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$ | 22,500,000 |
(b) Fixed Charge Coverage Ratio. Beginning with the fiscal quarter ended March 31, 2010, the Borrowers shall maintain a Fixed Charge Coverage Ratio, calculated as of the end of each fiscal quarter for the four fiscal quarters then ended, of no less than 1.00 to 1.00.
UPDATE: I’ve been doodling with the numbers (with a little help from our CFO). If, like us, the company is down 25% in revenues for the first half, on a rolling 12-month average it can easily cover the requirements. If there is a slight improvement and it is only down 20% for the second half, it will cover that, too. The risk — for all of us — is if the second half of 2009 is as bad as the first half.
7 comments
Is this less or more restrictive than the covenants that existed before they amended the agreement, Wick? Any idea what their “Adjusted EBITDA” was in the quarter ended September 30, 2008?
I wish we had this kind of analysis of the city budget or other really large companies in Dallas. Why the focus is here, I don’t know.
maybe because Belo is publicly traded and watched by the SEC
JRP, lots of companies are re-doing accounting practices…the delay in reporting may signal some changes…
Ok, so they can loose up to $4mm the first six months and then have to shift to making $6.5mm in the next 90 days. It’s not clear whether the 6.5 is cumulative or simply for the quarter, but the overriding question is what happens when they fail to make that covenant. It’s a leap that a gold medalist in the long jump couldn’t make – in fact Evil Knievel couldn’t do it.
These people act like the solution to their problem is “in-house” when, really, the problem is outside of their doors. They’ve got to change the public perception of “dying newspaper” and create excitement for a “thriving paper that serves its city.”
All we’ve heard for 4 years is “cut back,” “re-size the circulation area,” etc.
If you’re going to grow (in any economy), you better look like your growing right friggin’ now.
Ad revenue is down 50% at some of the local TV stations for the 1st quarter. I suspect you will see similar numbers at the DMN and FWST. By the 3rd quarter they will both be announcing many more layoffs and further expansion of their news sharing agreements. They absolutely will not make the numbers you posted above.