Sinclair’s Sports Network Debt Swap Offer Shunned by Bondholders
Sinclair’s Sports Network Debt Swap Offer Shunned by Bondholders
(Bloomberg) -- Sinclair Broadcast Group Inc.’s attempt to ease the debt load of its regional sports network unit was resisted by investors who balked at the steep haircut on a bond swap.
Only $66 million of eligible bonds, or 3.62%, were tendered by the final deadline on Tuesday, according to a news release on Thursday, showing no increase from an earlier cut-off date that offered more favorable terms to investors.
Sinclair had asked bondholders to take a discount of about 40 cents on a $1.8 billion bond sold less than a year ago to fund the acquisition of Walt Disney Co.’s regional sports networks.
Market watchers said the timing of the exchange, initially announced on May 12, was a surprise as the television broadcaster isn’t at imminent risk of default. The unsecured bonds, issued by the company’s Diamond Sports Group unit, have recovered to about 70 cents on the dollar from around 50 cents in early April, according to Trace data. Some investors expect the price of the debt to rise further if pressures from the pandemic ease and live sports resume.
The exchange offer emerged as a massive wave of corporate distress is pitting beleaguered companies against their lenders in brawls that are shaping up to be nastier than ever before. Firms are seeking to take advantage of years of weakening creditor protections to help cut obligations and raise cash after the coronavirus outbreak brought businesses to a standstill.
Due to loose covenants, Sinclair still has the ability to move valuable assets beyond the reach of bondholders -- a scenario reminiscent of the controversial J. Crew maneuver in 2016 -- as well as the right to repay shareholders before reducing debt. The company sought to remind holders just how much power it has when it extended the early deadline to June 1.
A group of more than half of the Sinclair bondholders, led by Shenkman Capital Management, worked with law firm Stroock & Stroock & Lavan to block the exchange.
Sinclair offered holders of its 6.625% unsecured notes due in 2027 to exchange into new 12.75% secured notes due in 2026. Investors that tendered by the final deadline would have received $467 worth of new notes and $103 in cash for every $1,000 of principal they turned in. Bondholders that tendered by the early deadline received $133 in cash.
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