Keith J. Kelly

Keith J. Kelly

Media

American Media gets a bond break

American Media, which publishes The National Enquirer, Star and Men’s Fitness, was thrown a lifeline when bondholders agreed to refinance about $104 million in second-lien bonds and to shave 3.5 percentages points off the interest rate.

The new rate drops from 13.5 percent to 10 percent on the second- lien bonds. That’ll save American Media about $12 million a year. The extra cash will be used to pare down debt on the $365 million in first lien bonds at 13.5 percent interest rate.

Bondholders may have been willing to construct this deal with a lower rate of return because the alternate scenarios may have been more daunting for them.

In January, Standard & Poor’s was preparing a scenario for a default on the $465 million in total debt sometime in 2014 and the credit rating service was predicting a distressed asset sale that would have netted bondholders, at best, 50 percent of the face value on the first-line bonds and zero for second-lien holders.

“The participating holders brought this deal to the company’s board as a way to accelerate balance sheet debt reduction, enhance liquidity and lower the company’s cost of capital,” one bondholder, who asked not to be identified, told Media Ink.