KKR-backed Seven West launches $450m share issue
KKR investee Seven West Media plans to raise approximately A$440 million ($450 million) through the sale of new shares in order to reduce debt levels. The Australian company, which owns the Seven free-to-air network, the country’s second-largest magazine publisher and a host of newspapers and websites, is struggling amid a weak advertising market.
KKR, which owns 11.8% of the company, and Kerry Stokes' Seven Group Holdings, which holds 33.2%, are expected to participate in the issue. However, the private equity firm will participate via the retail entitlement offer, rather than the institutional part, because it needs more time to come up with the money. It is expected to account for A$52.1 million of the A$170 million retail allocation.
Seven West has launched an underwritten one-for-two entitlement offer of approximately 333 million new shares at A$1.32 apiece, an 18.5% discount on Friday's closing price of A$1.62. The company's stock has fallen 57% since an earnings downgrade in late April.
The capital raising will allow Seven West to reduce its net debt to A$1.4 billion, while its net-debt to EBITDA ratio should fall to around 2.7x. The company noted that the wider advertising market remains subdued, but it expects to record earnings before interest and tax of A$473 million for 2012, slightly above previous projections.
KKR first got involved with Seven West - then known as Seven Media Group - in 2006, subscribing to a A$735 million convertible note that entitled it to about half the company. Seven then borrowed A$2.5 billion, reportedly at a gearing ratio of 62.5% gearing, assuming a flow back of some A$3.2 billion.
Last year, Stokes' West Australian Newspapers (WAN) took control of the business through a A$4.1 billion buyout, which saw KKR's holding fall to 12.6% from 45%. The merged entity was renamed Seven West.
It was reported late last year that Seven West was examining proposals to refinance up to A$2 billion of debt.
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