There are some encouraging developments going on over at MNI. They refinanced most of their debt at alower interest rate and pushed most of the maturities 10 years out from now. The new 9% debt is already trading at 110, so it appears to me that they could refinance again at 7% if they are quick enough to take advantage of this bond bubble. At the same time, their digital investments are performing very well and EBITDA appears to be stabilizing.
The debt that was really far out in 2027 and 2029 has gone from 40 to 75 in the last 18 months. I don’t remember if I pointed this out or not back then. The CCC debt due 2014 which I said would be easily repaid has traded from 70 to 101.
The point is, this company is not going to need to dilute shareholders to reduce debt. They can keep chipping away from FCF and refinancing at lower rates while the business stabilizes and perhaps returns to growth.
The company is generating 300m of EBITDA. EBIT is around 175m, DA is 125m, capex is 25m, Interest Expense is about 125m, and they collected about 40m in dividends from their digital properties in 2012 which is not included in EBITDA. Over the next 4 years, they can generate at least 600m of FCF, cut interest expenses in half through debt retirement (focusing on the highest yield) or maybe more through refinancing. In a normal world, 3x leverage and 5x interest coverage on a stable business with most maturities 10 years out is sustainable, especially when the debt is fully covered by real estate assets.
The market cap is 217m, and I think that could be about 1x FCF 4-5 years out.