Investors are turning to acquiring secured debt in financially starved media companies to establish a foothold. The strategy is nothing new, especially among hedge funds and hostile bidders, but it's interesting to note some of the well-known investors that have lent money to companies such as the New York Times Co. (NYSE:NYT) and Sirius XM Radio Inc. (NASDAQ:SIRI). The New York Post points out on Thursday some of these heavy-hitting media debt investors include financiers Carl Icahn, and Carlos Slim, and media moguls John Malone and Charlie Ergen.
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The motivation for these debt purchases vary from investor to investor but two things are for certain that all these deals have in common: These investors will receive high-yield debt and have an influential say in company strategy. Slim, for example, gave a $250 million loan in the form of six-year notes with an attractive 14% interest rate.
The Post expounds that some of these investors even look to these deals to "have a voice in a potential bankruptcy or to gain control of a company on the cheap."
The latter could be the case with Icahn, who is acquiring debt on movie studio Metro-Goldwyn-Mayer with the intention of forcing a merger with Lionsgate should MGM defaults on its loans, according to the Post.
In a time when debt has become a taboo word in financial parlance, it's interesting to see some with deep pockets still managing to show how it can be used just as effectively to take control of a company without buying stock. - Gerald Magpily
See NY Post article
