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Managing Debt Covenants in Hard Times
TVNewsDay
3/4/2009
To say that current economic conditions are challenging for broadcasters is akin to noting that the Ice Age was chilly.
Like many industries, consolidation and growth was fueled by the easy availability of capital, and now broadcasters struggling under the weight of reduced advertising sales and large debt payments must also struggle to meet their loan covenants.
For those of us involved in both the regulatory and transactional sides of the industry, 2009 threatens to be the year that bankruptcies, loan workouts and alternative financing arrangements exceed all other major transactions.
In working with both broadcasters and their creditors seeking to navigate these dark waters, we have crafted some basic “rules of the road” that make it easier to both assess and preserve your options going forward.
At the outset, the most obvious piece of advice — and advice that is too often ignored — is that in today’s difficult financial environment, broadcasters need to continually focus on their relationships with their lenders.
Rather than avoiding such conversations as the risk of violating a loan covenant grows, broadcasters should actively engage their lenders, even if they find such discussions uncomfortable.