(Bloomberg) -- Canadian television company Corus Entertainment Inc. has agreed to halve the size of a debt lifeline in exchange for more relaxed conditions from its lenders, according to a Friday press release.
The financially distressed firm inked a deal with its bank group, led by RBC Capital Markets and TD Securities, to amend and restate its senior secured credit facility. The deal involves cutting its revolving facility to C$150 million ($108 million) from C$300 million, with the ability to request advances up to C$65 million.
In return for the slashed package size, the banks will increase their maximum total debt-to-cash flow ratio to 5.75 through December 31 this year, and 7.25 from January 1, 2025 through March 31, 2025. The restated credit facility will now mature on March 18, 2026.
The refreshed terms ought to provide some relief for Corus. Raising the debt-to-cash flow ratio would allow the company’s cash to fall or its debt levels to rise, or both, giving it more flexibility to pay obligations. And a longer repayment runway buys it more time to recover or to restructure its debt package, or even pursue possible buyers.
However, finding “meaningful” residual value for Corus’s equity holders “seems like a long shot,” given the company’s debt load and revenue headwinds, TD Securities analysts led by Vince Valentini wrote in a Friday note.
Corus on Friday reported revenue for the fourth quarter that declined 21% year-over-year and missed the average analyst estimate. The TD Cowen analysts commended Corus’ management for “aggressively” managing operating expenditure and working capital so that Ebitda declines were less severe than revenue declines. However, they also cautioned “even further pain” for revenue, Ebitda and free cash flow in early fiscal 2025.
Toronto-listed shares of Corus plunged as much as 13% Friday for its biggest intraday drop in a month. The stock stood at 15 Canadian cents at 11:04 a.m. on Friday.
The firm, which owns cable television channels as well as local TV and radio stations in Canada, is controlled by the Shaw family of Alberta.
--With assistance from Geoffrey Morgan.
(Updates with context on share price in the second-last paragraph.)
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