Salem Communications could partially redeem 9% notes with equity proceeds

New York, April 26 - Salem Communications Corp. (B3/B-) announced plans to raise capital through a stock offering and said it could use the proceeds to redeem a portion of its outstanding 9% senior subordinated notes due 2011.

Salem, a Camarillo, Calif.-based radio station owner and provider of religious-themed broadcast content, said that it intends to offer 3.1 million shares of its Class A common stock in a registered public offering, consisting of 2.325 million primary shares to be offered by the company and 775,000 secondary shares to be offered by selling stockholders. The company and the selling stockholders additionally expect to grant the underwriters an over-allotment option to purchase up to an additional 175,000 shares from Salem and 225,000 shares from the selling stockholders.

Salem said that it intends to use the net proceeds from the stock offering for working capital and general corporate purposes, which may include the redemption of up to $52.5 million principal amount of the outstanding 9% senior subordinated notes (i.e., 35% of the $150 million of the notes which the company issued in June 2001).

Salem did not outline a timeframe for the stock offering or for any buyback of the notes, although a standard equity clawback provision in the notes' indenture authorizes the company to buy back up to 35% of the notes at 109 using proceeds from any equity sale. This must be done in the first three years after the notes are issued.

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