Sinclair altering setup of debt

Broadcast company cites competition for advertising

March 31, 2001|By Andrew Ratner | Andrew Ratner,SUN STAFF

Hurt by fiercer competition for the advertising dollar, Sinclair Broadcast Group Inc. has hired an investment banking firm to restructure its loans, the Cockeysville-based broadcaster disclosed yesterday.

"We recognize that the national market for advertising has softened due to increased competition from other forms of media, such as cable and the Internet, as well as a general slowdown in the economy," Sinclair stated in its annual fiscal report filed yesterday with the federal Securities and Exchange Commission.

Sinclair, the largest non-network-related broadcaster in the country, said J. P. Morgan Chase & Co. was hired to reduce its loans from $1.75 billion to $1.1 billion and give it more time to make debt payments in exchange for a higher yield. Sinclair would have had to repay $250 million this year under its 2-year-old loan pact.

About $600 million of the new credit will be offered to banks at 2.875 percentage points higher than the London interbank offered rate, or Libor. That's about 1 percentage point higher than Sinclair's existing loan agreement.

"It provides greater flexibility for us in the long run," David Amy, executive vice president for Sinclair, said yesterday.

Sinclair's stock closed at $7.25, down 13 cents, on the Nasdaq stock exchange. That is down 43 percent from mid-January, when the stock traded at $12.68.

"The notion that Sinclair is highly indebted is not new to investors. It's been a topic of discussion for many months," said Leland Westerfield, an analyst with UBS Warburg in New York, explaining Wall Street's mild reaction.

Sinclair's TV stations, affiliated with ABC, CBS, FOX, NBC, WB and UPN, reach a quarter of all the country's households with televisions.

The company said it plans to beef up its local advertising staff to help insulate it from volatility in national advertising.

Net broadcast revenue increased $56.7 million to $727 million for the year ended Dec. 31, up nearly 9 percent from $670.3 million in 1999. But the 4.7 percent increase in same-station revenue - revenue at stations Sinclair owned in 1999 and 2000 - was due primarily to political advertising tied to the 2000 election, the company said.

Broadcast cash flow margin, a key measure, was up 2 percent, from $338.9 million in 2000 to $332.3 million in 1999.

To help cut costs, the company instituted an early retirement program to trim about 40 employees.

The company reported losses in investments of $16.8 million for the year, compared with $500,000 in 1999. About $10 million of that is related to a write-off of its investment in Acrodyne Communications, Inc., a broadcast equipment manufacturer.

Acrodyne was delisted from the Nasdaq stock exchange in September after failing to file with the SEC on time.

The company in February forecast after-tax cash flow, or earnings before depreciation, amortization and one-time charges and gains, of $1.25 to $1.30 a share this year, down from $1.59 in 2000. Net broadcast revenue, adjusted for station purchases and sales, is expected to fall by a high single-digit percentage rate from $736 million in 2000, the company said.

Bloomberg News contributed to this article.

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