The owner of radio station TalkSport has announced plans to raise almost £50 million as it becomes the latest firm to ask shareholders for a cash boost.
Broadcasting group UTV, which runs 24 radio stations and an ITV franchise, said the discounted rights issue formed part of a wider refinancing aimed at reducing debt and strengthening its balance sheet.
Ireland-based UTV said it remained confident in its long-term prospects, but added it was mindful of the need to balance risk with prudence in the current climate.
As a result, it has already put in place new five-year financing facilities and will ask shareholders to participate in a 130p-a-share rights issue, representing a 39 per cent discount on Tuesday’s share price. The underwritten offer will raise £49.9 million and involve two new shares for every three held.
It is the latest rights issue to hit the market following cash calls from Imperial Tobacco and a number of banking groups.
UTV originally intended to start the refinancing this summer, but accelerated the process given the “prevailing and potentially worsening financial market conditions”.
Chief executive John McCann said: “I am pleased that we are able to maintain our cautiously optimistic outlook for this year and have completed the refinancing of the group in the context of very challenging credit markets.”
Mr McCann was quick to point out that the company was not in any danger of breaching its banking covenants, and the move comes amid solid trading at the group. Regional publisher Johnston Press’s 61 per cent-discounted rights issue last month was specifically designed to avoid a covenant breach.
“There are a number of rights issues out and about now, but there’s a huge difference between actually going to shareholders for a rights issue on the basis of sound trading and that which is maybe happening elsewhere,” he said.
The basis of the cash call was the uncertainty in the credit markets which caused the company to accelerate its refinancing plans, due to start in the summer, and as part of that the firm felt it prudent to reduce debt levels, added Mr McCann.
At year-end, UTV’s debt stood at £107.2 million, which represented a gearing of 4.5-4.7 times net debt to EBITDA.
Mr McCann said following the cash call this ratio would reduce to the ‘low threes’ and within a year would be expected to be below three.
The high gearing was brought about by several acquisitions in the past few years as the group has expanded from a Northern Ireland television company to a diversified media business. In May, the company said it achieved revenues growth of seven per cent in the first four months of the year, up four per cent on a like-for-like basis.
It added that TalkSport had “performed extremely well” with revenues growth of 19 per cent, a rate which it expected to be maintained for the remainder of the six month trading period.
The national station achieved a 12 per cent sales improvement in 2007, even though the comparative figure a year earlier included significant revenues from advertising related to the World Cup. UTV’s other radio stations include Swansea Sound, Wish FM and Juice FM.