Discovery Communications recently completed what is claimed to be the largest private media transaction of the last decade – a US$700 million private placement agreement. Agented by Merrill Lynch, the transaction was performed in three tranches: a $300 million five-year note with a 7.81% coupon, a $180 million seven-year note with a 8.06% coupon, and a $220 million ten-year piece with an 8.37% coupon. In non-banking terms, the move sees Discovery borrowing $700 million from private investors with the promise to pay it back in ten years at varying interest rates. Interest payments will be made semi-annually with the principals to be paid in full when the notes mature.
A $350 million deal had been in the works over the past several months, but it was doubled before completion. A Discovery executive confirms that a portion of the money will be used to pay down bank debts secured at higher interest rates. The additional money, he says, represents outside investor desire to become involved in the deal.
Independent financial analysts confirm that a transaction of this nature could improve a company’s short-term profit and loss statements by replacing high-interest loans with less expensive financing, making a company more financially attractive to external investors. However, when asked if the move suggests Discovery might be tidying its books in preparation for a sale, a DCI spokesperson responded, ‘Absolutely not.’ The exec stated that the money will allow the company to grow its business both in the u.s. and internationally, but refused comment when asked if a portion of this sum was to be used for the purpose of buying a competing broadcaster.