Lamar Media Corp., subsidiary of Lamar Advertising Company (LAMR), announced a tender offer for the purchase of $385 million 7 1/4% senior subordinated notes due 2013.
In order to fund the same, Lamar simultaneously priced the private offering of 7 7/8% senior subordinated notes due 2018 aggregating $400 million.
The company is expected to generate net proceeds of approximately $391 million from the offering.
The company has extended the period of repayment, but the debt did not reduce in total. As on December 31, 2009, total debt was $2.6 million and there was $3.3 million of outstanding convertible notes due 2010.
Despite the level of debt presently outstanding, the terms of the indentures governing Lamar Media’s notes and the terms of the senior credit facility allow Lamar Media to incur substantially more debt.
As management accelerates the company’s top-line growth through acquisitions, the increased debt associated with acquisitions may pressure earnings growth.
However, we believe that Lamar will continuously benefit from stronger billboard business and an increase in demand for local advertising.
Lamar’s internal and external investment activities have allowed it to capture a considerable share of localized outdoor advertising markets, which account for more than 80% of its annualized net revenue.
Given the company’s large and growing national presence, we expect an additional upside going forward as it continuously builds its national sales presence and expands its relationships with larger and national advertisers.
However, we reiterate our Neutral recommendation on the stock until the company shows some improvement.
Read the full analyst report on “LAMR”
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