Financial Issues Facing Larger Markets / Large Broadcasters
January 12, 2010 Jim Cotter - Biography
Jim Cotter, Managing Director, Mergers & Acquisitions
Joined SunTrust Robinson Humphrey in 2007 as a Managing Director in Mergers and Acquisitions. Previous experience includes ten years of strategic advisory and transaction execution experience at various firms including JPMorgan Chase & Co., Jefferies Group, Inc. and CIT Group. Education: M.B.A. from Cornell’s Johnson School of Management; B.A. in Philosophy, Tulane University.
Selected Transaction Experience
Sale of Emageon to AMICAS Divestiture of Non-Digex Intermedia Assets Financial Advisor to PARC Management Strategic Advisor to Rythms Net Connections Sale of NationsRent (Baupost) Strategic Advisor to COINTEL (Hicks Muse) Fairness Opinion Motient Strategic Advisor to PSN Sports (Hicks Muse) Sale of Palace Entertainment (Windward) Convertible Preferred Stock Placement for RCN Communications Fairness Opinion to Palace Entertainment (Windward) Sale of United Building Materials (Oak Hill) Acquisition of Hünnebeck by HARSCO Acquisition of Dap by RPM 363 Sale of Murray, Inc. Poison Pill Pricing for RPM 363 Sale of ASI / Robicon Sale of President Baking Acquisition of Intermedia Communications by WorldCom Strategic Advisor to Quexco regarding GNB Battery Advised the Special Committee of Rivera Holdings Corporation Advised MSV on Merger with SkyTerra Advised the Special Committee of XO Communications and Advised First Avenue and Provided Fairness Opinion for Merger Provided Fairness Opinion with Crown Castle
1 Media & Communications Verticals
Selected Sector Relationships
Data Competitive Radio / Centers / Cable Wireless Wireline Telecom / Publishing Outdoor Television / Internet Fiber Advertising Networks Infrastructure
Paxton Media DukeNet
2 SunTrust Robinson Humphrey Media & Communications Team
Horace Zona, Managing Director & Group Head Rick Fogg, Managing Director
Joined STRH in 2008 as Group Head of the Media & Joined STRH in 2008 as Managing Director in the Media Communications Corporate Investment Banking & Communications Group. Practice Previous experience includes 15 years in the Media & Previous experience includes over 17 years in the Media Communications sector at various firms including & Communications sector at various firms including Wachovia Securities / First Union Securities, AG Wachovia Securities / First Union Securities, TD Edwards and Wheat First Butch Singer. Securities, UBS Securities and Kidder Peabody Education: M.B.A. from Darden Business School at The Education: B.A. from Boston College University of Virginia; Accounting major at Bucknell
Fred Wysk, Director Bill Dauska, Vice President
Joined STRH in 2008 as a Director in the Media & Joined STRH in 2008 as a Vice President in the Media & Communications Group. Communications Group. Previous experience includes covering traditional & Prior to STRH, Bill was a Vice President in the Media & digital media companies at Banc of America Securities Communications group at Wachovia Securities. Prior to and Managed Services and Biotech clients with Morgan Wachovia, Bill was an Associate at Donaldson, Lufkin & Stanley’s Healthcare investment banking group. Jenrette / Credit Suisse First Boston. Education: M.B.A from the MIT Sloan School of Education: M.B.A. in Finance and Accounting from the Management, J.D. from Whittier Law School; B.S. in University of Chicago Graduate School of Business; Accounting from Arizona State University B.S. in Accounting from the University of Minnesota
3 Media Loan Syndications Volume First Quarter 2004 – Third Quarter 2009
$30
$25 24.2 22.6
$20 19.0
16.7
$15 12.8 11.8
($ in Billions) in ($ 11.5
9.8 9.0 $10 8.7
6.3 5.9 5.4 4.8 $5 3.8 3.6 2.8 1.8 2.2 0.2 0.8 0.0 0.4 $0
4 4 5 5 6 6 7 7 8 8 9 9
0 0 0 0 0 0 0 0 0 0 0 0
Q Q Q Q Q Q Q Q Q Q Q Q 1 3 1 3 1 3 1 3 1 3 1 3
4 Source: Standard & Poor’s 3Q’09 Media & Telecom Review Total Media High Yield Bond and Leveraged Loan New Issuance Proceeds
$30B
$25B
$20B
$15B
$10B
$5B
$0B
4 4 5 5 6 6 7 7 8 8 9 9 0 0 0 0 0 0 0 0 0 0 0 0 Q Q Q Q Q Q Q Q Q Q Q Q 1 3 1 3 1 3 1 3 1 3 1 3
Leveraged Loans High Yield
Source: LCD/ Merrill Lynch/Morgan Stanley 5 Rolling Three Month Average of New Issue Media Spreads
L+600
L+500
L+400
L+300
L+200
L+100
) ) ) ) ) ) ) ) ) ) ) ) 4 2 9 7 3 8 1 4 4 8 3 1 2 ( 1 2 1 1 2 ( ( ( ( ( ( ( ( ( ( NA 5 8 8 ( 9 4 4 0 5 6 6 7 7 0 0 9 0 0 - 0 0 0 - l- l- 0 - - 0 - 0 - 0 - l n l - l - l n u - u n u a u n u n u a J n J a J J J a J a J J a J J J J
Pro Rata Weighted Average Institutional
6 Source: Standard & Poor’s 3Q’09 Media & Telecom Review Average Pro Rata and Weighted Average Institutional Spread for Media Loans
Deals of $250MM of More
Pro Rata Weighted Average Institutional L+450 1.67% 3.63% 5.23% 5.30% 2.91% 0.83% LIBOR L+400 L+350 L+300 L+250 L+200 L+150 L+100
(43) (14) ons: 42) 2005 2006 (37) 2007 (27) 2008 3Q09 (7) vati bser 1Q09- O 04 ( 20
Source: Standard & Poor’s 3Q’09 Media & Telecom Review 7 Par Amount of Media S&P/LSTA Index Loans in Payment Default or Bankruptcy
$30
$25.1 $25
$20
$15 ($ in Billions) in ($
$10 $8.8
$5 $3.0 $3.0 $3.0
$0.0 $0 YE2004 YE2005 YE2006 YE2007 YE2008 1Q-3Q09
Note: Includes all loans including those not included in the LSTA/LPC mark-to-market service Note: Vast majority are institutional tranches 8 Source: Standard & Poor’s 3Q’09 Media & Telecom Review Radio Sector Share Price Performance and Valuation
5-Year Share Price Performance
150 125 100 75 50 25 (83.7%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
5-Year Enterprise Value / LTM EBITDA
16.0x 14.0x 12.0x Average: 11.0x 10.0x 8.0x 6.0x 4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Current Enterprise Value / LTM EBITDA
18.0x 17.1x 16.0x 14.0x 11.4x 12.0x 10.7x 10.5x 10.3x Average: 11.1x 10.0x 9.7x 7.8x 8.0x 6.0x CMLS ROIA.K CTDB EMMS ETM RGCI SALM
Note: As of 01/08/2010 Source: Thomson One 9 Radio Index includes: Citadel Broadcasting, cumulus Media, Emmis Communications, Entercom Communications, Radio One, Regent Communications, Salem Communications Newspaper Sector Share Price Performance and Valuation
5-Year Share Price Performance
150 125 100 75 50
25 (82.3%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
5-Year Enterprise Value / Forward EBITDA
12.0x
10.0x
8.0x
6.0x Average: 7.7x
4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Current Enterprise Value / Forward EBITDA
12.0x 10.0x 10.1x 10.0x 9.3x 8.0x 2009E Average: 8.3x 7.7x 8.0x 7.2x 7.0x 6.8x 7.7x 2010E Average: 7.5x 5.4x 6.0x
4.0x
2.0x
0.0x NYT MNI GCI JRN MEG
Note: As of 01/08/2010 2009E 2010E Source: Thomson One Newspaper Index includes: Gannett, Journal Communications, McClatchy Co., Media General, The New York Times Co. 10 Television Sector Share Price Performance and Valuation
5-Year Share Price Performance
150 125 100 75 50 25 (68.4%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
5-Year Enterprise Value / Forward EBITDA
14.0x
12.0x
10.0x Average: 9.7x 8.0x
6.0x
4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10
Current Enterprise Value / Forward EBITDA
16.0x 15.0x 14.0x 12.7x 11.8x 12.0x 2009E Average: 11.7x 10.0x 8.9x 9.0x 10.0x 9.1x 8.0x 7.8x 2010E Average: 8.2x 8.0x 6.9x 6.0x 4.0x 2.0x 0.0x BLC NXST SBGI GTN TVL
2009E 2010E Note: As of 01/08/2010 Source: Thomson One 11 Television Index includes: Belo, Gray Television, LIN TV, Nexstar Broadcasting, Sinclair Broadcast Group Industry Observations and Conclusion
Capital Markets Senior debt markets are constrained by reduced investor appetite and fewer investors High year market is open to stronger operators looking to refinance Total debt multiples are significantly lower and pricing higher Equity investors are conservative, but recognize the cyclical opportunity Operating Environment Explosion of online competition – print, radio, video, interactive Macro recessionary forces creating a perfect storm Public Policy Objective Threat of a ownership concentration restricting information flow is diminished New and information are now ubiquitous Entertainment programming is flowing through new distribution channels rapidly Conclusion Less restrictive cross ownership rules could promote new business models and strengthen traditional media
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