Time Inc. Bondholders Reap Gains After Debt Skyrockets on Deal News

  • Meredith Corp. to buy magazine publisher for $1.8 billion cash
  • Bonds soar as terms require Time to repay all its debtholders
Bloomberg Intelligence’s Paul Sweeney discusses a deal between Meredith and Time Inc..

Time Inc. bondholders are receiving a gift for the holidays as prices for their debt have skyrocketed on the news that Meredith Corp. agreed to buy the magazine publisher for about $1.8 billion in cash.

Terms of the deal require Time to redeem all of its debt, sending investors racing to buy the company’s bonds in hopes of a near-term payday. The company’s $300 million of 7.5 percent notes due 2025 surged more than 5 cents on the dollar Monday morning to trade above 114 cents, according to Trace bond-price reporting data. That’s the biggest jump ever for the bonds, which were issued in October.

Time has been looking for breathing room to address its $1.2 billion debt load, which looks riskier for the company as it faces the same kind of pressure on ad revenue that has hurt other print media companies. The company issued the new senior unsecured bonds due 2025 to repay some of its term loan and other obligations. The acquisition by Meredith will eliminate Time’s existing debt, while giving Meredith a larger audience. The billionaire Koch brothers agreed to support Meredith’s offer with a $650 million equity injection.

Despite the positive response to the deal from credit investors, holders of the notes due 2025 should proceed with caution, according to a report published Monday from independent credit research firm Covenant Review. Time could use the “equity claw” redemption provision to redeem up to 40 percent of those notes, leaving them with less money than they’d receive under a make-whole redemption. Bondholders “might have to vigorously assert their rights,” the analysts wrote.

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