Financial Issues Facing Larger Markets / Large Broadcasters January 12, 2010
Jim Cotter - Biography Jim Cotter, Managing Director, Mergers & Acquisitions Joined SunTrust Robinson Humphrey in 2007 as a Managing Director in Mergers and Acquisitions. Previous experience includes ten years of strategic advisory and transaction execution experience at various firms including JPMorgan Chase & Co., Jefferies Group, Inc. and CIT Group. Education: M.B.A. from Cornell s Johnson School of Management; B.A. in Philosophy, Tulane University. Selected Transaction Experience Sale of Emageon to AMICAS Financial Advisor to PARC Management Sale of NationsRent (Baupost) Fairness Opinion Motient Sale of Palace Entertainment (Windward) Fairness Opinion to Palace Entertainment (Windward) Acquisition of Hünnebeck by HARSCO 363 Sale of Murray, Inc. 363 Sale of ASI / Robicon Acquisition of Intermedia Communications by WorldCom Advised the Special Committee of Rivera Holdings Corporation Advised the Special Committee of XO Communications and Provided Fairness Opinion Divestiture of Non-Digex Intermedia Assets Strategic Advisor to Rythms Net Connections Strategic Advisor to COINTEL (Hicks Muse) Strategic Advisor to PSN Sports (Hicks Muse) Convertible Preferred Stock Placement for RCN Communications Sale of United Building Materials (Oak Hill) Acquisition of Dap by RPM Poison Pill Pricing for RPM Sale of President Baking Strategic Advisor to Quexco regarding GNB Battery Advised MSV on Merger with SkyTerra Advised First Avenue and Provided Fairness Opinion for Merger with Crown Castle 1
Media & Communications Verticals Selected Sector Relationships Data Competitive Centers / Cable Wireless Wireline Telecom / Publishing Internet Fiber Infrastructure Radio / Outdoor Advertising Television / Networks DukeNet Paxton Media 2
SunTrust Robinson Humphrey Media & Communications Team Horace Zona, Managing Director & Group Head Joined STRH in 2008 as Group Head of the Media & Communications Corporate Investment Banking Practice Previous experience includes over 17 years in the Media & Communications sector at various firms including Wachovia Securities / First Union Securities, TD Securities, UBS Securities and Kidder Peabody Education: B.A. from Boston College Rick Fogg, Managing Director Joined STRH in 2008 as Managing Director in the Media & Communications Group. Previous experience includes 15 years in the Media & Communications sector at various firms including Wachovia Securities / First Union Securities, AG Edwards and Wheat First Butch Singer. Education: M.B.A. from Darden Business School at The University of Virginia; Accounting major at Bucknell Fred Wysk, Director Joined STRH in 2008 as a Director in the Media & Communications Group. Previous experience includes covering traditional & digital media companies at Banc of America Securities and Managed Services and Biotech clients with Morgan Stanley s Healthcare investment banking group. Education: M.B.A from the MIT Sloan School of Management, J.D. from Whittier Law School; B.S. in Accounting from Arizona State University Bill Dauska, Vice President Joined STRH in 2008 as a Vice President in the Media & Communications Group. Prior to STRH, Bill was a Vice President in the Media & Communications group at Wachovia Securities. Prior to Wachovia, Bill was an Associate at Donaldson, Lufkin & Jenrette / Credit Suisse First Boston. Education: M.B.A. in Finance and Accounting from the University of Chicago Graduate School of Business; B.S. in Accounting from the University of Minnesota 3
Media Loan Syndications Volume First Quarter 2004 Third Quarter 2009 $30 $25 22.6 24.2 $20 19.0 ($ in Billions) $15 $10 16.7 8.7 11.5 12.8 11.8 9.8 9.0 $5 $0 4.8 2.8 5.9 3.8 6.3 3.6 5.4 1.8 2.2 0.0 0.2 0.4 0.8 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 4 Source: Standard & Poor s 3Q 09 Media & Telecom Review
Total Media High Yield Bond and Leveraged Loan New Issuance Proceeds $30B $25B $20B $15B $10B $5B $0B 1Q04 3Q04 1Q05 3Q05 1Q06 3Q06 1Q07 3Q07 1Q08 3Q08 1Q09 3Q09 Leveraged Loans High Yield 5 Source: LCD/ Merrill Lynch/Morgan Stanley
Jan-09 (NA) Jul-09 (3) Rolling Three Month Average of New Issue Media Spreads L+600 L+500 L+400 L+300 L+200 L+100 6 Jan-04 (14) Jul-04 (22) Jan-05 (9) Jul-05 (17) Jan-06 (23) Jul-06 (18) Jan-07 (11) Jul-07 (24) Jan-08 (4) Jul-08 (8) Pro Rata Weighted Average Institutional Source: Standard & Poor s 3Q 09 Media & Telecom Review
Average Pro Rata and Weighted Average Institutional Spread for Media Loans Deals of $250MM of More Pro Rata Weighted Average Institutional L+450 1.67% 3.63% 5.23% 5.30% 2.91% 0.83% L+400 L+350 L+300 L+250 L+200 L+150 L+100 2004 (Observations: 42) 2005 (43) 2006 (37) 2007 (27) 2008 (14) 1Q09-3Q09 (7) LIBOR 7 Source: Standard & Poor s 3Q 09 Media & Telecom Review
Par Amount of Media S&P/LSTA Index Loans in Payment Default or Bankruptcy $30 $25 $25.1 $20 ($ in Billions) $15 $10 $8.8 $5 $3.0 $3.0 $3.0 $0 YE2004 YE2005 YE2006 YE2007 YE2008 1Q-3Q09 $0.0 8 Note: Includes all loans including those not included in the LSTA/LPC mark-to-market service Note: Vast majority are institutional tranches Source: Standard & Poor s 3Q 09 Media & Telecom Review
Radio Sector Share Price Performance and Valuation 5-Year Share Price Performance 150 125 100 75 50 25 (83.7%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 5-Year Enterprise Value / LTM EBITDA 16.0x 14.0x 12.0x Average: 11.0x 6.0x 4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Current Enterprise Value / LTM EBITDA 1 16.0x 14.0x 12.0x 6.0x 17.1x 10.3x 10.7x 11.4x 10.5x 9.7x 7.8x CMLS ROIA.K CTDB EMMS ETM RGCI SALM Average: 11.1x 9 Note: As of 01/08/2010 Source: Thomson One Radio Index includes: Citadel Broadcasting, cumulus Media, Emmis Communications, Entercom Communications, Radio One, Regent Communications, Salem Communications
Newspaper Sector Share Price Performance and Valuation 5-Year Share Price Performance 150 125 100 75 50 25 (82.3%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 5-Year Enterprise Value / Forward EBITDA 12.0x 6.0x Average: 7.7x 4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Current Enterprise Value / Forward EBITDA 12.0x 6.0x 10.1x 7.2x 9.3x 7.7x 7.0x 6.8x 7.7x 5.4x 2009E Average: 8.3x 2010E Average: 7.5x 4.0x 2.0x 0.0x 10 NYT MNI GCI JRN MEG Note: As of 01/08/2010 2009E 2010E Source: Thomson One Newspaper Index includes: Gannett, Journal Communications, McClatchy Co., Media General, The New York Times Co.
Television Sector Share Price Performance and Valuation 5-Year Share Price Performance 150 125 100 75 50 25 (68.4%) 0 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 5-Year Enterprise Value / Forward EBITDA 14.0x 12.0x Average: 9.7x 6.0x 4.0x Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Current Enterprise Value / Forward EBITDA 16.0x 15.0x 14.0x 12.0x 6.0x 4.0x 2.0x 0.0x 12.7x 11.8x 9.1x 8.9x 9.0x 7.8x BLC NXST SBGI GTN TVL 6.9x 2009E Average: 11.7x 2010E Average: 8.2x 11 2009E 2010E Note: As of 01/08/2010 Source: Thomson One Television Index includes: Belo, Gray Television, LIN TV, Nexstar Broadcasting, Sinclair Broadcast Group
Industry Observations and Conclusion Capital Markets Senior debt markets are constrained by reduced investor appetite and fewer investors High year market is open to stronger operators looking to refinance Total debt multiples are significantly lower and pricing higher Equity investors are conservative, but recognize the cyclical opportunity Operating Environment Explosion of online competition print, radio, video, interactive Macro recessionary forces creating a perfect storm Public Policy Objective Threat of a ownership concentration restricting information flow is diminished New and information are now ubiquitous Entertainment programming is flowing through new distribution channels rapidly Conclusion Less restrictive cross ownership rules could promote new business models and strengthen traditional media 12