$100 Mil added – The SCA Balance Sheet Repaired, Paying Dividends Next

Southern Cross Austereo has entered into a new long-term contract with the Australian Traffic Network (ATN) today, that sees ATN stump up $100 Million Cash upfront.

ATN has been SCA’s provider of traffic reports for over 10 years and the new 20-year contract, with a ten year extension option, will also see SCA receive payment from ATN in return its stations broadcasting advertising tags on news and traffic reports.

SCA’s CEO, Grant Blackley said: “We are delighted to have entered into a long-term arrangement with ATN for them to continue to provide traffic and information reports in metro and regional markets. The arrangement fits with our focus on localism in radio.

“The new contract has enabled SCA to accelerate its capital management initiatives by utilising the initial up-front cash payment for debt reduction. This completes our balance sheet repair process, enables SCA to resume paying full cash dividends and provides a stronger balance sheet for the future.”

SCA advised the Market (ASX: SXL) that the $100 million up-front cash payment will be used by the company to reduce leverage and financing costs and to provide future balance sheet flexibility.

Some Key Highlights of the new contract are:.

• 20 year contract extension with ATN, with an option for ATN to extend by 10 years.
• $207 million (1) contract value, crystallising long-term value for traffic and news radio inventory and reducing contract volatility.
• $100 million up-front cash payment to SCA on 9 February 2016.
• Additional annual recurring payment to SCA from 1 February 2017 of $2.75 million, indexed annually by the lower of CPI and 2.5%. This payment will continue if the contract continues beyond the initial 20 years.
• ATN will continue to provide advertising attached to news and traffic reports, equating to approximately 3% of total metro radio inventory and 0.5% of regional radio inventory.
• The most recent contract commenced in 2011 and would have expired in October 2016. That contract would have delivered EBITDA of approximately $6 million for the remaining five months of FY2016.

You can view the full ASX Release here.