Gray Announces Upsizing and Pricing of $1.25 Billion of 10.500% Senior Secured First Lien Notes due 2029

Rhea-AI Summary

Gray Television announced the pricing of its private offering of $1.25 billion 10.500% senior secured first lien notes due 2029, an increase of $250 million from its initial announcement. The notes were priced at par and are expected to close on June 3, 2024, alongside the refinancing of its senior credit facility. The proceeds, combined with other financial sources, will refinance Gray's $1.2 billion tranche E term loan due 2026, repurchase 5.875% senior notes due 2026, and cover related expenses. The notes will be guaranteed by Gray's subsidiaries and offered to qualified institutional buyers and non-U.S. persons under specific regulations.

Positive

• Gray increased the offering size by $250 million, indicating strong demand.
• The notes were priced at 100% of par, showing confidence in the valuation.
• The funds will be used to refinance existing debt, potentially lowering interest expenses with newer, possibly more favorable terms.

Negative

• The new notes carry a high interest rate of 10.500%, which may increase interest expenses.
• The offering is subject to customary closing conditions and the refinancing of its senior credit facility, which introduces completion risk.
• The Notes have not been registered under the Securities Act, limiting their marketability and potentially increasing investor risk.

Financial Analyst

Gray Television's move to upsize and price its senior secured notes offering is a significant development. The company's issuance of $1.25 billion in notes at a high interest rate of 10.500% is a strategic decision to refinance existing debt. This implies that Gray is looking to optimize its capital structure by addressing its maturing debt. The new notes will refinance a $1.2 billion tranche E term loan due in January 2026 and repurchase all outstanding 5.875% senior notes due the same year.

Such refinancing typically aims to extend debt maturities and manage interest costs, though the higher interest rate indicates a potentially increased risk perception by investors. It's important for retail investors to note that while refinancing can provide short-term liquidity relief, the higher interest rate may strain the company's financials in the long term, especially if its revenue growth doesn't keep pace.

The notes being offered at 100% of par suggests confidence in Gray's ability to meet its obligations, yet the high yield could reflect market caution about the company's creditworthiness. Investors should also consider the broader market conditions, including interest rate trends and the company's earnings performance.

Credit Market Expert

From a credit market perspective, Gray Television's issuance of senior secured notes with a 10.500% coupon rate is a clear indicator of the company's desire to lock in financing under current market conditions. The upsizing by $250 million suggests strong demand from institutional investors, yet the high yield points towards perceived credit risk.

The refinancing strategy involving the tranche E term loan and the 5.875% senior notes is a tactical approach to manage debt service obligations, but it does come at the cost of higher interest expenses. Investors should weigh the benefits of extended maturities against the financial burden of higher coupon payments. Additionally, the offering under Rule 144A and Regulation S means it's targeted at sophisticated investors, possibly signaling complex underlying credit conditions.

Retail investors should be aware that high-yield bonds typically carry higher default risks and while the guarantees from Gray's subsidiaries provide some security, the overall health of the company's operations will be critical in maintaining confidence in these notes.

ATLANTA, May 23, 2024 (GLOBE NEWSWIRE) -- Gray Television, Inc. (“Gray”) (NYSE: GTN) announced today the pricing of its previously announced private offering of $1.25 billion aggregate principal amount of 10.500% senior secured first lien notes due 2029 (the “Notes”). This represents an increase of $250 million over the amount previously announced. The Notes were priced at 100% of par. The offering of the Notes is expected to close on June 3, 2024, subject to customary closing conditions and the closing of the refinancing of its senior credit facility.

The Notes are being offered, together with the net proceeds of up to $500 million of a new tranche F term loan, availability under its revolving credit facility and cash on hand, to refinance Gray’s $1.2 billion tranche E term loan due January 2, 2026, repurchase in a tender offer any and all of its outstanding 5.875% senior notes due 2026 and pay all fees and expenses in connection with the offering.

The Notes will be guaranteed, jointly and severally, by each existing and future restricted subsidiary of Gray that guarantees Gray’s existing senior credit facility.

The Notes and related guarantees will be offered only to qualified institutional buyers under Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”), and to non-U.S. persons in transactions outside the United States under Regulation S of the Securities Act. The Notes have not been, and will not be, registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and other applicable securities laws.

This press release does not constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. This notice is being issued pursuant to and in accordance with Rule 135c under the Securities Act.

Forward-Looking Statements:

This press release contains certain forward-looking statements that are based largely on Gray’s current expectations and reflect various estimates and assumptions by Gray. These statements are statements other than those of historical fact and may be identified by words such as “estimates,” “expect,” “anticipate,” “will,” “implied,” “intend,” “assume” and similar expressions. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results and achievements to differ materially from those expressed in such forward-looking statements. Such risks, trends and uncertainties, which in some instances are beyond Gray’s control, include Gray’s ability to consummate the offering of notes, the senior credit facility refinancing or the tender offer; the intended use of proceeds of the offering and the senior credit facility refinancing; and other future events. Gray is subject to additional risks and uncertainties described in Gray’s quarterly and annual reports filed with the Securities and Exchange Commission from time to time, including in the “Risk Factors,” and management’s discussion and analysis of financial condition and results of operations sections contained therein, which reports are made publicly available via its website, www.gray.tv. Any forward-looking statements in this communication should be evaluated in light of these important risk factors. This press release reflects management’s views as of the date hereof. Except to the extent required by applicable law, Gray undertakes no obligation to update or revise any information contained in this communication beyond the date hereof, whether as a result of new information, future events or otherwise.

Gray Contacts:

Jim Ryan, Executive Vice President and Chief Financial Officer, 404-504-9828
Jeff Gignac, Executive Vice President, Finance, 404-504-9828
Kevin P. Latek, Executive Vice President, Chief Legal and Development Officer, 404-266-8333

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FAQ

What is the interest rate for Gray Television's new notes offering?

The interest rate for Gray Television's new notes offering is 10.500%.

When is the closing date for Gray Television's new notes offering?

The closing date for Gray Television's new notes offering is expected on June 3, 2024.

How much did Gray Television increase its notes offering by?

Gray Television increased its notes offering by $250 million to a total of $1.25 billion.

What will the proceeds from Gray Television's notes offering be used for?

The proceeds will be used to refinance a $1.2 billion term loan, repurchase 5.875% senior notes due 2026, and cover related fees and expenses.

Who will guarantee the notes offered by Gray Television?

The notes will be guaranteed by each existing and future restricted subsidiary of Gray that guarantees Gray’s existing senior credit facility.