12:51pm PT by Ashley Cullins
Cumulus Media Sues JPMorgan to Access More Credit
Cumulus Media wants to access a $305 million revolving credit facility to refinance some of its debt, but JPMorgan Chase won't allow it, according to a complaint filed Monday in New York federal court.
The radio giant, like many of its peers, has experienced a decline in business. According to the complaint, the company has implemented initiatives to improve ratings and revenues that are working — but are hindered by a heavy debt load.
Currently, Cumulus is carrying $2.4 billion in debt: $1.8 billion in outstanding first lien term loans and $610 million of 7.75 percent senior notes due in 2019.
The radio giant claims its 2013 credit agreement with JPMorgan includes a $200 million revolving credit facility, which may be increased with incrementally. Cumulus wants to access a total of $305 million to fund a refinancing of 55 percent of the senior notes, but JPMorgan is refusing.
According to the complaint, Cumulus is only able to borrow under the revolving credit facility if its first lien net indebtedness is under a certain threshold. Currently, that threshold is set at $950 million. So, to access the revolving credit, Cumulus would need JPMorgan to amend the leverage ratios agreed to in the 2013 deal.
Cumulus says the refinancing will significantly reduce its overall leverage and eliminate a "springing maturity" of its term loan that would be triggered if more than $200 million of senior notes are outstanding in January 2019.
"By avoiding this springing maturity, Cumulus gains more time to improve its operational performance and benefit from its business initiatives that are already underway," states the complaint. "With this additional time, Cumulus will gain the ability to use its ongoing positive free cash flow to reduce the amount outstanding under its Term Loan."
Cumulus is asking the court for a declaration that its proposed refinancing does not constitute a breach, default or event of default under the credit agreement, a declaration that JPMorgan breached the credit agreement by not consenting to the amendment, and an order compelling JPMorgan to effectuate the refinancing. (Read the full complaint below.)
JPMorgan declined to comment.