Source Interlink has reached an agreement with investor
GoldenTree Asset Management to recapitalize the company. The deal
"significantly deleverages" each of the company's core business
units, Source Interlink Media and Source Interlink Distribution, while
increasing GoldenTree's stake in the group. "The tremendously improved capital structure will
provide both Source Interlink Media and Source Interlink Distribution with the
ability to maximize transformational opportunities across their respective
industries," says Michael Sullivan, president and CEO of Source Interlink,
in a statement. "This transaction will put both businesses in better
positions to strengthen strategic partnerships and make investments to enhance
their position in their respective industries." "This is a very
typical move that most media companies that were acquired by private equity
firms in the past 5-7 years are making," says Reed Phillips, CEO and
managing partner of investment firm DeSilva + Phillips, in an email to Audience
Development. "Most of these buyouts were overleveraged and can no longer
support the level of debt that was originally put on the businesses, and are
thus being restructured. That simply means that debtholders take equity in
exchange for reducing the debt load on the company and the equity holders see
their positions shrink to the point where many are no longer in control of the
business. The net result is that this is very good news for the company because
they can start to run their businesses without the constraints they had when
the company was overleveraged."
