Cumulus Media has announced a debt for equity swap offer with the holders of its outstanding 7.75% Senior Notes due in 2019.

The offer would see 57.3% of those debt notes converted into a 33% stake in the company in order to retire $610 million in debt the company currently owes. Cumulus would also receive an additional $305 million in revolver loans as part of a new credit facility in the proposed deal.

The deal would eliminate nearly a quarter of the $2.4 billion in debt the company currently holds. Debt holders would see their money owed converted into the Cumulus Pass Through Trust that would own the 33% stake in the company.

Cumulus Media Inc. (NASDAQ:CMLS) (the “Company”) today announced that it has entered into a refinancing support agreement (the “Refinancing Support Agreement”) with the holders of approximately $349.7 million, or 57.3%, of the aggregate principal amount of the outstanding 7.75% Senior Notes due 2019 (the “Outstanding Notes”) issued by Cumulus Media Holdings Inc. (“Holdings”), a direct wholly-owned subsidiary of the Company, and guaranteed by the Company. The Refinancing Support Agreement sets forth the terms of a refinancing of the Outstanding Notes and pursuant to its terms the Supporting Noteholders have agreed to tender their Outstanding Notes in a private exchange offer to be made by the Company (the “Exchange Offer”), subject to certain conditions set forth in the Refinancing Support Agreement.

The purpose of the Exchange Offer is to refinance the Outstanding Notes and thereby reduce, and extend the maturity of, the Company’s indebtedness, which the Company believes will promote its long-term financial viability. The Company will not retain any cash proceeds from borrowings incurred in connection with the Exchange Offer. The Outstanding Notes tendered and refinanced in connection with the Exchange Offer will be retired and cancelled and will not be reissued.

If 100% of the aggregate principal amount of the Outstanding Notes is tendered and accepted in the Exchange Offer, upon completion of the Exchange Offer, former noteholders will hold 33.3% of the common equity of the Company and the Company will have retired $610.0 million in outstanding unsecured indebtedness represented by the Outstanding Notes and incurred $305.0 million in secured indebtedness represented by the revolving loans (as defined below) under the Company’s existing credit agreement (as defined below).

The consideration to be provided to holders in the Exchange Offer will consist of (i) at the holder’s option, (a) revolving loans due 2020 (the “revolving loans”) or (b) participation interests in the revolving loans (the “participation interests”) and (ii) shares of the Company’s Class A common stock (“Class A common stock”) (and/or warrants to purchase an equal number of shares of Class A common stock if deemed necessary to comply with the requirements of the Communications Act of 1934, as amended, or the rules, regulations and policies promulgated by the Federal Communications Commission in effect from time to time (the “warrants”)) for any and all Outstanding Notes tendered by such holders in the Exchange Offer. At the settlement date of the Exchange Offer (the “Settlement Date”), the participation interests will automatically be deposited into an entity that the Company will establish to effect the refinancing, Cumulus Pass Through Trust, a Delaware statutory trust (the “Trust”), in exchange for an equal aggregate principal amount of new trust certificates due 2020 (the “trust certificates”), representing fractional undivided interests in the property of the Trust (the “Trust Property”). The Trust Property will consist of:

a) participation interests in the revolving loans, with an aggregate principal amount equal to the aggregate principal amount of outstanding trust certificates;
b) funds resulting from payments made in respect of interest and fees on the revolving loans and repayments of revolving loans with a corresponding reduction in commitments, in each case which are deposited into the Trust from time to time for distribution to holders of trust certificates (“Certificateholders”);
c) funds resulting from repayments of principal on the revolving loans without a corresponding reduction in commitments that are deposited on behalf of the Trust with an institution, as a lender under the existing credit agreement (the “new revolving lender”), from time to time and held by the new revolving lender to fund any future revolving borrowings or for distribution to the Trust for distribution to Certificateholders once the commitments relating to such repayment amounts have been terminated; and
d) certain other assets and contractual rights and remedies as described in more detail in the Offering Memorandum that will be provided to noteholders in connection with the Exchange Offer (the “Offering Memorandum”).

The revolving loans will be issued under the Amended and Restated Credit Agreement, dated as of December 23, 2013, among Holdings, as borrower, the Company, as parent, JPMorgan Chase Bank, N.A., as administrative agent (the “Administrative Agent”), and the other parties from time to time party thereto (the “existing credit agreement”). In connection with the Exchange Offer, Holdings will enter into two amendments to the existing credit agreement to (i) provide for the incurrence of the revolving loans pursuant to an Incremental Revolving Facility (as defined in our existing credit agreement) in an aggregate amount sufficient to consummate the Exchange Offer and (ii) include certain modifications to the terms of our existing revolving credit facility under the existing credit agreement (our “existing revolver”), including to (a) extend the Revolving Credit Termination Date (as defined in our existing credit agreement) to November 23, 2020, (b) modify the financial covenant in section 8.1 of our existing credit agreement to permit the borrowing of the revolving loans in connection with the Exchange Offer and require compliance with the Consolidated First Lien Net Leverage Ratio (as defined in our existing credit agreement) at the levels currently set forth in our existing credit agreement for any future borrowings under our existing revolver, (c) upon completion of the Exchange Offer, elimination of the financial maintenance covenant under our existing revolver, (d) increase the Applicable Margin (as defined in our existing credit agreement) with respect to the revolving loans to 13.25%, subject to a 1.0% floor, for Eurodollar Rate loans (as defined in our existing credit agreement), and 12.25%, subject to a 2.0% floor, for ABR loans (as defined in our