LONG-TERM DEBT (Block)

9 Months Ended

Sep. 30, 2017

4. LONG-TERM DEBT

(A) Senior Debt

The Credit Facility

On November 1, 2016, the Company and its wholly owned subsidiary, Entercom Radio, LLC, (“Radio”) entered into a $540 million credit agreement (the “Credit Facility”) with a syndicate of lenders that was initially comprised of: (a) a $60 million revolving credit facility (the “Revolver”) that matures on November 1, 2021; and (b) a $480 million term B loan (the “Term B Loan”) that matures on November 1, 2023.

As of September 30, 2017, the amount outstanding under the Term B Loan was $458.0 million and the amount outstanding under the Revolver was $22.5 million. The amount undrawn under the Revolver, which includes the impact of the outstanding letters of credit, was $36.8 million as of September 30, 2017. The Company’s ability to draw additional amounts under the Revolver may be limited due to its Consolidated Leverage Ratio.

Long-term debt was comprised of the following as of September 30, 2017:

			Long-Term Debt
			September 30,		December 31,
			2017		2016
				(amounts in thousands)
	Credit Facility
		Revolver, due November 1, 2021	$	22,500	$	-
		Term B Loan, due November 1, 2023		458,000		480,000
				480,500		480,000
	Other Debt
		Capital lease and other		74		87
Total debt before deferred financing costs				480,574		480,087
	Current amount of long-term debt			(3,618)		(4,817)
	Deferred financing costs (excludes the revolving credit)			(6,033)		(7,619)
Total long-term debt, net of current debt			$	470,923	$	467,651
Outstanding standby letters of credit			$	700	$	670

The Term B Loan requires mandatory prepayments equal to a percentage of Excess Cash Flow, which is defined within the agreement, subject to incremental step-downs, depending on the Consolidated Leverage Ratio. Beginning in 2018, the Excess Cash Flow payment will be due in the first quarter of each year, and is based on the Excess Cash Flow and Leverage Ratio for the prior year.

As of September 30, 2017, the Company’s Consolidated Leverage Ratio was 4.9 times versus a covenant limit of 5.0 times and the Consolidated Interest Coverage Ratio was 3.8 times versus a covenant minimum of 2.0 times.

As of September 30, 2017, the Company was in compliance with all financial covenants and all other terms of the Credit Facility in all material respects. The Company’s ability to maintain compliance with its covenants under the Credit Facility is highly dependent on its results of operations. Management believes that over the next 12 months the Company can continue to maintain compliance.

Management believes that cash on hand, cash from the Revolver and cash from operating activities, together with the proceeds of the committed financing described below, will be sufficient to permit the Company to meet its liquidity requirements over the next 12 months, including its debt repayments. The cash available from the Revolver is dependent on the Company’s Consolidated Leverage Ratio at the time of such borrowing.

Failure to comply with the Company’s financial covenants or other terms of its Credit Facility and any subsequent failure to negotiate and obtain any required relief from its lenders could result in a default under the Credit Facility. Any event of default could have a material adverse effect on the Company’s business and financial condition. The acceleration of the Company’s debt could have a material adverse effect on its business. The Company may seek from time to time to amend its Credit Facility or obtain other funding or additional funding, which may result in higher interest rates on its debt.

In connection with the CBS Radio Merger Agreement, CBS Radio entered into a commitment letter with a syndicate of lenders (the “Commitment Parties”), pursuant to which the Commitment Parties committed to provide up to $500 million of senior secured term loans (the “CBS Radio Financing”) as an additional tranche under a credit agreement (the “CBS Radio Credit Agreement”) among CBS Radio, the guarantors named therein, the lenders named therein, and JPMorgan Chase Bank, N.A., as administrative agent. The proceeds of this additional tranche will be used to: (1) refinance the Company’s Credit Facility; (2) redeem the Company’s Perpetual Cumulative Convertible Preferred Stock (“Preferred”); and (3) pay fees and expenses in connection with the refinancing. On March 3, 2017, CBS Radio entered into an amendment to the CBS Radio Credit Agreement, to, among other things, create a tranche of Term B-1 Loans in an aggregate principal amount not to exceed $500 million. The Term B-1 Loans, which replace the commitment, are expected to be funded by the Commitment Parties on the closing date of the Merger, subject to customary conditions. The Term B-1 Loans will be governed by the CBS Radio Credit Agreement and will mature on the date that is seven years after the closing date of the Merger. The Term B-1 Loans will require quarterly principal payments at an annual rate of 1% of the initial principal amount of the Term B-1 Loans, beginning with the first full fiscal quarter ending after the closing of the Merger. The Term B-1 Loans are expected to bear interest at a per annum rate equal to LIBOR plus 2.75%. Interest on the Term B-1 Loans will be payable at the end of each interest period, but in no event less frequently than quarterly.

(B) Senior Unsecured Debt

The Senior Notes

In 2016, the Company issued a call notice to redeem its $220.0 million 10.5% unsecured Senior Notes due December 1, 2019 (the “Senior Notes”) in full with an effective date of December 1, 2016, that was funded by the proceeds of the Credit Facility. As a result of the full redemption of the Senior Notes with replacement debt at a lower interest rate, the net interest expense for the first three quarters of 2017 was reduced and does not include amortization of original issue discount of Senior Notes.

The components of net interest expense are as follows:

	Net Interest Expense
	Nine Months Ended
	September 30,
	2017		2016
	(amounts in thousands)

Interest expense	$	16,913	$	25,382
Amortization of deferred financing costs		1,752		1,929
Amortization of original issue discount of senior notes		-		280
Interest income and other investment income		(79)		(38)
Total net interest expense	$	18,586	$	27,553

	Net Interest Expense
	Three Months Ended
	September 30,
	2017		2016
		(amounts in thousands)

Interest expense	$	5,920	$	8,324
Amortization of deferred financing costs		586		611
Amortization of original issue discount of senior notes		-		96
Interest income and other investment income		(30)		(17)
Total net interest expense	$	6,476	$	9,014