RE:More details from TD So TD think 10 cents - BNS , who have been toughest on cjr in their Q calls etc suggested 18 cents - but i still stick with my estimate of 12 cents - 50% haircut
incomedreamer11 wrote: Details
Amended bank leverage covenants: Corus proactively negotiated increased near-term flexibility with an increase in the 4.25x debt/EBITDA covenant over the next four quarters, as follows:
• Q2/23: 4.50x
• Q3/23: 4.75x
• Q4/23: 4.75x
• Q1/24: 4.50x
If bank leverage exceeds 4.0x at any point, then distributions to equity holders (dividends and/or buybacks) will be limited to a certain percentage of trailing 12-month free cash flow.
Recall that leverage under the bank covenant includes gross debt (no credit for cash on hand) and proportionate EBITDA; so it is about 0.25x–0.3x higher than the reported debt/EBITDA ratio (which was 3.38x at Q1/23).
Other options for dividend cash:
If the dividend were to be reset to .10 versus .24 (yield of about 5%), then Corus would have an extra $28mm to deploy into these potential areas:
• Buying back bonds at a discount (see the analysis below regarding deleveraging opportunities created by the low bond prices);
• Repurchasing arguably low-valued stock;
• Or even making tuck-in content acquisitions that augment growth and diversification.
Buying back bonds would be slightly accretive to FCF and leverage: Both series of publicly traded bonds (one maturing in 2028 and the other in 2030) are trading at around 76 cents on the dollar, with yields of just over 11%. If Corus were to use some of its excess cash to repurchase these bonds, then every one dollar of debt repayment would reduce net debt by about $1.31 (assuming that purchases are done gradually, so as to not meaningfully inflate the current trading prices). Given the need to maintain good relations with the banking syndicate, we believe there are practical limits to how much cash Corus could use to repay debt that ranks below the credit facilities, but at the minimum, we believe that funds saved from a lower dividend could be used for this purpose.