The owner of Canada’s largest newspaper chain has struck a refinancing deal and extended the deadline to pay back its debt for the second time in three years.
Postmedia Network Inc., which owns the National Post, regional dailies such as the Montreal Gazette and Calgary Herald and a number of community newspapers, announced the transaction on Friday. The company will eliminate $94.8-million in first-lien notes maturing in 2021 by issuing $95.2-million in new notes maturing in July, 2023. The debt will carry the same interest rate of 8.25 per cent. It has also extended the maturity of its second-lien debt by six months, to January, 2024.
“It gives us more time, extends our runway and allows us to execute on our strategy,” Postmedia chief executive Andrew MacLeod said in an interview.
Since Postmedia’s previous debt restructuring, which closed in October, 2016, the company has reduced its first-lien notes – the debt that must be repaid first in case of default – by 58 per cent, from $225-million at the time to $94.8-million.
Three years ago, the company also cited the need to “extend the runway,” as it was struggling under significant interest payment obligations. Rather than risk missing a payment, which Postmedia has never done, it began exploring options for recapitalization in 2015. It struck a deal that significantly reduced the company’s debt load but also essentially wiped out the value of its equity for existing shareholders, thanks to a provision that swapped US$268-million of second-lien debt for shares that totalled 98 per cent of the company’s equity. The company then used a new issuance of second-lien debt to help finance the deal, which paid back a large chunk of the first-lien debt.
“Postmedia wasn’t in a particularly strong position to be negotiating. We were grateful for the fact that we were able to recapitalize the company," Mr. MacLeod said. Now that the debt has been further reduced, he added, “there’s a greater level of comfort and confidence” among its creditors.
Over the past few months, Postmedia management began discussing another refinancing deal with its largest first-lien noteholder, Richmond Hill, Ont.-based Canso Investment Counsel Ltd., and with its largest shareholder, New Jersey-based investment firm Chatham Asset Management.
The new deal means that, upon closing, Canso will own 100 per cent of the first-lien notes.
Postmedia expects the deal to close in early September.
The deal reduces a burden on the company in terms of the excess cash flow it is required to devote to debt repayment: a minimum of $10-million under the old terms will be reduced to a $5-million minimum. Mr. MacLeod said the company will continue to explore further asset sales and will put the proceeds toward its debt – but he stressed it “will not move them at distressed or fire-sale prices.”
The agreement also removes a requirement for Postmedia to hold quarterly conference calls to discuss its earnings with investors. The calls were sparsely attended and did not attract interest from equity analysts.
Postmedia’s stock, which trades very infrequently, rose more than 17 per cent Friday to $3.21.
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Susan Krashinsky Robertson