Thread regarding Synamedia layoffs

https://pitchbook.com/news/articles/synamedia-refinances-syndicated-debt-via-460m-private-credit-deal

Some interesting comment about this “legacy business’.

@OP+1qKK3xij Net cash from the refinancing was $60m according to FY23 Accounts.

Therefore a breakdown of the $410m might be something like:

$410m refinance total
($60m net cash after refinancing)
($232m First Lien repayment)
($100m Second Lien repayment)
($0m RCF repayment)

That leaves $18m which may well have gone on fees related to the refinancing + any RCF balance increase between Jun and Dec 2023.

FY22 bonus would have come out of the $60m net cash.
FY22 bonus estimated at anywhere from $27m to $55m.

That would leave $5m to $33m in net cash after refinance and FY22 bonus payment.

Urgh. Tell me you don't know blah without telling me - it's such a 2020 cliche aimed at st-----g your own ego. Disappointing.

Yes, we understand the difference between PE & Private Credit, Non Bank Funding and Corporate Debt Instruments. It doesn't matter.

What matters is that rather than angel investor or VC swooping in buying Syna, we are in a situation where it is laden with debt and beholden to other parties who hold charges over us. Furthermore the interest rates these kind of agreements are made are extortionate, and a bunch of investment bankers, debt advisors etc have had a cut in fees along the way. Hopefully as CB rates fall the debt markets will improve, and hopefully the company will build new products and new revenue streams which will cover things, but I have low confidence on the second point.

@8iax+1qKK3xij The last financing round cost $36.9m in facility fees and advisory costs. This round was presumably similar. You would assume these are paid for by money raised, so existing lenders + fees/costs + FY22 + some working capital = $410m without much effort.

Tell me you don't know business and finance without telling me you don't know business and finance.
It's called "Private Credit", not "Private Equity" (PE). Well known PE model is the Venture Capital model aka VC funding in return for some "private equity"/stake in the company. VC money is the free money where startups & companies burn it off with or without much accountability, and the VC firms are generally fine with it because of crazy high ROI potential. The other way of raising money is through public credit where usually large listed banks lend to companies. There are many more ways of raising money like leveraged loans, IPO, stock buybacks, and so on but we don't have to deal with those now.

Synamedia has secured this time through Private Credit. Prior to this, our creditors were Bank of America (look at previous charges dating back 5 years ago) - that was not private credit. We'd have hoped to get leveraged loan on existing debt, but that did not happen due to current economic conditions. So, yes - the terms of borrowing have changed this time around, and yes it is 'probably' expensive. However, this is not unique to Synamedia. Companies run in losses all the time (thankfully we don't), and creditors - either private or banks - are willing to lend or fund because they see value in such companies and "expect" these companies to increase EBIDTA.

Why Private Credit now? Because, the VCs & large banks are very risk averse at the moment - (https://news.crunchbase.com/venture/global-funding-data-analysis-ai-eoy-2023/). There has been a steady increase in Private credit, in particular, a big shift in 2023. This is the financial working model for 100s, if not 1000s, of software companies around the world right now. Synamedia's competitors as well run on borrowed money. (see xperi, mediakind, dish network, nagra or any streaming/paytv company for that matter)

Private Creditors have no skin in the game? Farther from the truth. Read more on Private Credit, depends on the deal and country. More importantly, find ways to increase EBIDTA "the right way". If you don't do it, someone else will. Don't sleep during SynaMeets and/or BU AllHands.

Synamedia "will max out our Capital One Gold credit card within a year", you say? That Synamedia cannot generate offsetting revenue in the next 3-5 years or that it cannot make itself more efficient without the sky falling? So funny. I'd like to think Synamedia employees are wiser than those who fall for this horsesh-t.

@fnsa+1qKK3xij The FY22 accounts projected the cash cost of debt for FY23 @ $30m interest and $20m capital repayment.

Accounts for FY23 (to 25 June 2023, so only 7 months old) have been submitted to Companies House and are being processed: https://find-and-update.company-information.service.gov.uk/company/11305402/filing-history. They won't include the new refinancing but should make for interesting reading nonetheless.

Here's a link to the company filings.

https://find-and-update.company-information.service.gov.uk/company/11305472/filing-history

This lists the new parties who now hold a charge over the company. If the debt is in the range of $400m and our last rating was B- the debt is floating rate referenced from Libor or similar, then I would guess we are paying 7+% on this. Which is $28m before we even get out of bed. Add in the amortisation and this is a significant drag on the company. No doubt the investment banks, lawyers and people who manage the CLOs (debt instruments) also take their pound of flesh. My concern is that this is already gone past the point where the company will ever be able to manage to reduce this debt.

The private equity model is one where the company gets saddled with the debt - they hardly put in any cash to start with. They literally have no risk or skin in the game. Plus they charge fees to the company to recoup their initial investment. If they manage to sell the company on it's a bonus, if it fails, zero fcks given.

Deciphering credit ratings:
https://www.fitchratings.com/products/rating-definitions#about-rating-definitions

I suspect we will max out our Capital One Gold credit card within a year. It's easy to look rich on borrowed money, until it's all gone.

I suggest you do some research on how the shady world of PE operates. They are the modern day double glazing salesmen.

@9njd+1qKK3xij "so if you work at Synamedia, it's time to get back to "real" work and deliver."

And get off thelayoff.com!

@8iax+1qKK3xij
Appreciate the breakdown.
Frankly - even if the borrowing "ballooned", which you say it did not, it does not matter. It's a pretty good deal whatever Synamedia could get to buy some time until the markets pick up.

@8hrs+1qKK3xij
Let's be real. Borrowing money has become expensive in the last two/years. Small and medium-sized businesses all around the world are struggling to survive because of lack of funding, and the economy is not doing well. This means many companies, including Synamedia, are force to operate at peak efficiency (hint: search for "layoffs"). Now, as you rightly put it - borrowed money costs a lot to Synamedia. The company needs to make big profits to pay back the interest and invest in the future. The best way to do this is by making more money in a smart way. If generating new revenue is hard because of the economic conditions, the only choice is to make the company 'lean' to keep the profits intact. It's not too complicated - so if you work at Synamedia, it's time to get back to "real" work and deliver.

@8sct+1qKK3xij "Synamedia successfully secured $460 million through private credit"...at what cost though!

@OP+1qKK3xij I don't work in corporate finance...

$50m of the $460m is a new RCF facility. That should be undrawn and can (probably) be ignored when comparing new debt levels vs old.

That leaves $410m ($350 million first-lien unitranche loan and $60 million in junior notes).

From this existing lenders need paying:

$232m First Lien (as 30 September 2023)
$100m Second Lien
$6m RCF (as of 26 June 2022)
$338m Total

Therefore $72m of "new borrowing" ($338m vs $410m), however...

The First Lien could have been less: $227m not $232m if we made a $5m quarterly payment before the refi closed.

More importantly, the RCF could have been more: The (old) RCF limit was $50/$60m. The $6m balance is 18 months out of date. It's possible that the RCF borrowing was significantly more than the $6m, anywhere up to the $50/60m. It could also have been at zero.

That gives a range of anywhere from $327m to $392m to pay off previous lenders.

Then you've got to add on the FY22 bonus cost.

Assuming an average 10% to 20% bonus paid out against the FY23 $276m "personnel costs" the cash needed to pay the bonus could be anywhere from $27m to $55m.

That takes the finance needed to pay off previous lenders + pay FY22 bonus to between $354m to $447m.

The mid-point of that range is $400m, not too far off the $410m.

Add in some additional extra non-RCF working capital and you get to the $410m.

All this to say, there's probably some "new borrowing" but I wouldn't characterise the debt as having "ballooned". It looks like not much more than the minimum has been taken. Given the refinance struggles, it's probably about as much as was on the table.

Nothing to see here; it's business as usual. Despite the challenging funding landscape, Synamedia successfully secured $460 million through private credit. With venture capital scarce globally, private credit has stepped in to bridge the gap. You don't have to be an accountant to access this information—just a bit of skill in using Google search and awareness of current events in the global economy.

Left no, axed ye, at least during the first major layoff session. Not sure about subsequent rounds.

Credit where credit is due. They fulfilled the obligation they took upon themselves in writing.

Did they pay the bonus to people who left or were axed?