Discovery Communications enters $2.5 billion replacement revolver

By Marisa Wong

Los Angeles, June 10 – Discovery Communications, LLC and some subsidiaries entered into a multicurrency revolving credit agreement on June 9 for a senior revolving credit facility with initial commitments of $2.5 billion, according to an 8-K filing with the Securities and Exchange Commission.

Parent company Discovery, Inc. and Scripps Networks Interactive, Inc. are facility and subsidiary guarantors, respectively.

Bank of America, NA is administrative agent, swingline lender and letter-of-credit issuer.

The credit agreement replaces the existing $2.5 billion credit agreement dated Feb. 4, 2016 with Bank of America as administrative agent. Proceeds from the new credit agreement may be used to repay all obligations under the existing $2.5 billion credit agreement and for other general corporate purposes.

Upon the closing of Discovery’s proposed combination transactions with AT&T’s media business, known as WarnerMedia, the available commitments under the new facility may, under some conditions, be increased by $3.5 billion, to an aggregate amount of up to $6 billion.

Following the closing of the proposed combination transactions, the obligations of the borrowers will also be guaranteed by the holding company of the WarnerMedia business.

The credit agreement includes a $150 million sublimit for the issuance of standby letters of credit.

The company may also request an additional increase of the commitments from time to time up to an aggregate additional $1 billion from the lenders.

The senior credit facility permits the borrowers to borrow under two separate tranches in dollars, some specified foreign currencies and other currencies that may be approved in accordance with the credit agreement.

Loans will bear interest based on a floating rate of Libor, the Base rate, Euribor, Tibor or Sonia, depending on the applicable currency of borrowing, plus a margin. The margin for dollar-based Libor loans will range from 77.5 basis points to 135.0 bps based on Discovery’s debt ratings.

In addition, the company has agreed to pay a facility fee, quarterly in arrears, on the aggregate commitments that ranges from 10.0 bps to 27.5 bps, based on debt ratings.

The senior credit facility will be available on a revolving basis until June 9, 2026, with two 364-day extension options. The borrowers may optionally prepay the loans or irrevocably reduce or terminate the unutilized portion of the commitments under the senior revolver, in whole or in part, without premium or penalty at any time.

The credit agreement requires the company to maintain a consolidated interest coverage ratio of no less than 3.00 to 1.00 and a consolidated leverage ratio of no more than (i) from and after the last day of the first full fiscal quarter following the effective date to the measurement period ending on the last day of the first full fiscal quarter following the closing date, 4.50 to 1.00, (ii) from and after the measurement period ending on the last day of the first full fiscal quarter following the closing date to the measurement period ending on the last day of the first full fiscal quarter after the first anniversary of the closing date, no more than 5.75 to 1.00, (iii) from and after the measurement period ending on the last day of the full fiscal quarter after the first anniversary of the closing date to the measurement period ending on the last day of the first full quarter after the second anniversary of the closing date, 5.00 to 1.00; and after that, 4.50 to 1.00.

In calculating consolidated EBITDA for purposes of calculating the financial covenants, some additional items that would not have been permitted addbacks under the existing $2.5 billion credit agreement are now permitted to be added back, including losses to the extent related to the implementation of direct-to-consumer platforms and the provision of coverage for the 2020 Summer Olympics. The specific add-backs mentioned in the preceding sentence are capped at $750 million for any measurement period ending on or after Sept. 30, 2021 through and including June 30, 2022; $500 million for any measurement period ending on or after Sept. 30, 2022 through and including June 30, 2023; $250 million for any measurement period ending on or after Sept. 30, 2023 through and including June 30, 2024; and zero thereafter.

JPMorgan Chase Bank, NA, Goldman Sachs Bank USA, BofA Securities, Inc., Barclays Bank plc, BNP Paribas, Citibank, NA, Credit Suisse Loan Funding LLC, Deutsche Bank Securities Inc., Mizuho Securities USA LLC and RBC Capital Markets are joint lead arrangers and joint bookrunners.

JPMorgan and Goldman Sachs are also co-syndication agents.

The global media company is based in Silver Spring, Md.

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