Key Points
- A group of major banks led by Bank of America are arranging a $2.75 billion leveraged loan to help finance Nexstar Media Group’s proposed acquisition of TEGNA.
- The loan would cover nearly half of the more than $6 billion deal, with financing structured largely as a Term Loan B.
- The acquisition of TEGNA still requires approval from the FCC and the Justice Department, and could face legal challenges from several state attorneys general.
A coalition of household-name financial institutions are considering a leverage loan worth $2.75 billion to help Nexstar Media Group fund its proposed acquisition of peer broadcaster TEGNA, according to a report published this week.
The report, from Bloomberg, said Bank of America has taken a leading role in organizing the leveraged loan, a type of high-risk commercial loan that is offered to borrowers with a sizable amount of existing debt or below-investment grade credit ratings.
At the end of December, Nexstar counted more than $6 billion in debt associated with its own operations and that of Mission Broadcasting, another company whose broadcast stations are entirely controlled by Nexstar. Mission’s various acquisitions of local TV stations have been bankrolled by Nexstar over the past few years as part of a strategy that allows Nexstar to operate local TV stations without exceeding federal ownership restrictions.
Nexstar’s proposed acquisition of TEGNA is valued at more than $6 billion, based on the valuation of TEGNA’s stock at $22 per share, or more than $1 over its current stock market value.
The $2.75 billion leverage loan floated by Bank of America and other institutions would cover nearly half that bill. The money would be funded as a Term Loan B, which typically mature within five to seven years. A lender call involving various financial institutions, including Bank of America, was held on Monday, according to a person familiar with the matter.
Other banks that could be involved in the loan include JPMorgan Chase, Wells Fargo, Goldman Sachs, Capital One, U.S. Bank and Morgan Stanley, according to reports. Bank of America has set a deadline of March 18 for other banks to commit to the loan.
The term loan will involve nearly $2.4 billion in secured debt and $1.725 billion in unsecured debt, which will be used to refinance certain existing unsecured debt associated with Nexstar and senior unsecured notes associated with TEGNA.
Nexstar’s acquisition of TEGNA is still far from certain: The deal requires the approval of the Federal Communications Commission (FCC) and the U.S. Department of Justice. In late February, FCC Chairman Brendan Carr signaled his willingness to approve the deal, but regulators within the Justice Department continue to review it on antitrust grounds.
On a recent conference call with investors, Nexstar CEO Perry Sook said the company continues to update federal regulators at the Justice Department and said delays in getting that agency’s approvals were largely due to staff turnover there.
Nexstar and TEGNA also face the possibility of a prolonged legal battle involving regulators in some of the states where both broadcasters own local TV stations. According to the Wall Street Journal, state attorneys general in California, New York and Colorado are among several who are considering a lawsuit that could further delay the closing of the deal.
