On March 25, WMG announced that its executive VP/CFO Brian Roberts has resigned, but will stay with the company until the end of its fiscal year on Sept. 30. Sources told Billboard that Roberts is staying on in part to oversee the debt restructuring.
The funds raised from the debt offering will be used to redeem $765 million in senior unsecured notes carrying a 11.5% interest rate, according to Moody's. While the new debt has yet to be priced, the interest rate implied by the savings works out to total a rougly 6% yield for investors, but the pricing for the two tranches likely will be higher than that for the unsecured piece and lower for the secured notes.
According to sources familiar with the deal, the company made the move to refinance debt to capture interest payments savings, raise incremental cash, extend the maturity on debt and to take advantage of current strong market conditions for a debt offering.
Since acquiring WMG in July 2011, this deal marks the third time that Len Blavatnik's Access Industries has refinanced the company's debt. After the tender offer for the notes are completed, WMG's balance sheet will carry about $3.1 billion in debt.
According to the Moody's report, authored by VP and senior analyst Gregory Fraser, WMG's will have a 6.9-to-1 ratio of debt to EBITDA (earnings before interest, taxes, appreciation and amortization) at the end of fiscal 2014. That means Moody's expects WMG's EBITDA to total about $450 million in the current fiscal year.
For the fiscal year ended Sept. 30, 2013, WMG reported a net loss of $198 million on sales of $2.87 billion. In preparing data for the new offering, WMG recalculated performance for a 12-month period ended Dec. 31 so that bond investors would have the latest data. For that 12 month period, the company reports a net loss of $155 million on sales of $2.92 billion.