Townsquare cuts leverage by half a turn, plans to pay down more debt

By Devika Patel

Knoxville, Tenn., March 13 – Townsquare Media, Inc. intends to continue paying down debt in order to meet its targeted net leverage of 4x.

The company has already made significant strides in attaining this goal, reducing its net leverage by about a half turn in 2016.

“Our focus will remain on delivering strong, organic growth across our multi-product platform and chipping away at our leverage, with our medium term net leverage goal of 4x,” chairman and chief executive officer Steven Price said on the company’s fourth quarter earnings conference call on Monday.

“We grew revenue, EBITDA, net income and cash flow [in 2016], and we reduced net leverage approximately half a turn to less than 5x, meeting our year-end goal,” Price said.

“Over the course of 2016, we repurchased approximately $20 million of unsecured senior notes at prices below par,” executive vice president and chief financial officer Stuart Rosenstein said on the call.

“Just last month, we took advantage of market conditions and received strong support from our term loan lenders, allowing us to execute and amend our term loan facility, reducing the interest rate on our term loan by 25 basis points, which we expect to result in approximately $750,000 of annualized interest expense savings.

“This transaction has a six-month payback period,” Rosenstein said.

Rosenstein said that once the company reduces its leverage to its targeted numbers, it does not plan to take on additional debt and raise the leverage levels back up to a number that is not within its targeted range.

“We have said that our near term [leverage] target was on a net basis 5x and the midterm [goal] was to get down to the low fours.

“But even if we get down to those levels, I don’t think we’re going to be so aggressive as to get down to 4x just so that we can lever back up to 6x.

“We believe we have sufficient liquidity available to us to operate the business over the next 12 months and service our debt in the ordinary course,” Rosenstein said.

As of Dec. 31, 2016, Townsquare had a total of $51.5 million of cash on hand and $50 million of available borrowing capacity under its revolving credit facility.

As of Dec. 31, 2016, the company had $579.2 million of outstanding debt, representing 5.4x and 4.9x gross and net leverage, respectively.

Interest expense for the year ended Dec. 31, 2016, decreased approximately $1.9 million, or 5.3%, due to the refinancing of debt at more favorable rates on April 1, 2015 and the repayment of debt in 2016.

Adjusted EBITDA for the quarter ended Dec. 31, 2016 increased $3.8 million, or 18.1%, to $24.9 million, as compared to $21.1 million in the same period in 2015.

Adjusted EBITDA for the year ended Dec. 31, 2016 increased $8.8 million, or 9%, to $106.8 million, as compared to $98 million at the end of 2015.

Notes

Townsquare repurchased $17.2 million of its 6˝% senior notes due 2023 during the second quarter of 2016.

The buybacks were made at market prices below par and resulted in an accounting gain of $400,000 for the quarter.

Townsquare previously bought $700,000 of the notes on March 24, 2016, also below par, recording a gain of $34,000.

For all the repurchases, the company also paid accrued interest.

Term loan

On Jan. 30, the Greenwich, Conn., operator of radio stations and websites in small- and mid-sized markets held a lender call to launch a repricing of its $298.5 million first-lien term loan (Ba2/BB-) that was talked at Libor plus 300 basis points with a 1% Libor floor and a par issue price.

The repriced term loan includes 101 soft call protection for six months.

RBC Capital Markets LLC was the lead bank on the deal.

The repricing took the term loan down from Libor plus 325 bps with a 1% Libor floor.

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