WideOpenWest (NYSE:WOW), a telecommunications company, finalized a significant financial transaction, securing a new super-priority credit agreement. The deal includes a senior term loan of $200 million, which is set to mature in December of 2028. The loan carries an interest rate pegged to SOFR with an additional 700 basis points.
KeyBanc has maintained its Sector Weight rating on WideOpenWest following this announcement. The firm indicated that the implications of this new credit agreement could be negative for WOW's equity. Among the concerns raised are the increased annual cash interest expense, which is estimated to rise by approximately $27 million, from $77 million in the second quarter of 2024 to around $104 million after the transaction.
The transaction suggests that WideOpenWest may not proceed with the previously received unsolicited take-private offer of $4.80 per share from Digital Bridge, which was initially presented in May. It also hints at the unlikelihood of other bids emerging for the company. The additional capital is anticipated to provide only two to three years of operating financing, with free cash flow expected to decline from approximately -$40 million in 2024, assuming flat EBITDA from 2024 to 2025.
The increased financial obligations due to the higher cash interest expense, coupled with the potential need to manage capital expenditures more tightly, could impact WideOpenWest's growth initiatives. KeyBanc also suggests that this may not be the last round of financing for the company, based on previous assessments.
As part of the transaction's terms, WideOpenWest has also offered some forecasting details for the years 2025 to 2028, which may serve as a framework for investors to model future financial outcomes. This strategic move by WideOpenWest comes as the company looks to navigate its financial future amidst a challenging operating environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.