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j2 Global must keep debt to EBITDA below 3x to make dividend payments
By Devika Patel
Knoxville, Tenn., Nov. 30 – j2 Global, Inc. must keep its debt to leverage ratio at the cloud level below 3x in order to keep paying dividends. The ratio now stands at about 2.1x.
“The only debt that exists today at the cloud level is $650 million of the 6% notes, so our leverage ratio is about 2.1x,” president and chief financial officer Scott Turicchi said at the Bank of America Merrill Lynch 2017 Leveraged Finance Conference in Boca Raton, Fla., on Thursday.
“We’re about 2.1x leveraged today on just under $300 million of EBITDA, so we have a little bit more room before we hit the three to one,” Turicchi said.
The company needs to maintain its leverage ratio below 3x or debt to EBITDA, in order to keep paying dividends.
“Three to one is important to us for a variety of reasons.
“First of all, we’ve had the 8% notes that were outstanding since August of 2012 that have now been retired, so we’ve been in the high-yield market for a little over five years now.
“That’s always been the consistent view – 3x debt to EBITDA – that’s been told to ratings agencies as far back as 2012 and it’s been reaffirmed over the five years.
“The second piece is, in the current 6% notes, the restricted payments test is geared to 3x, so as long as our gross debt to EBITDA at the cloud level is less than 3x, we have the ability to dividend money up.
“If it becomes north of 3x, then it’s restricted to $75 million plus a builder basket.
“We have both a philosophical reason and we have a practical reason as to why, at the cloud level, debt to EBITDA be less than 3x,” Turicchi said.
j2 Global provides internet services and is based in Los Angeles.
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