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MDC Partners eyes leverage target of 2.5 times, possible refinancing of $735 million notes in 2016
By Lisa Kerner
Charlotte, N.C., Nov. 21 – MDC Partners Inc.’s leverage is about 3.5 times, and its target is below 2.5 times, a goal it should be able to reach in about two years, “give or take,” according to chief financial officer David Doft.
“We’re on a steady path to do so,” Doft said during a presentation Friday at the Morgan Stanley 14th Annual Technology, Media & Telecoms Conference in Barcelona, Spain.
The 2.5 times “seems like the right place for us to be” for two reasons, said Doft: “one, to protect the business, and two, to still have the ability to be opportunistic around acquisitions.”
If MDC should get below its 2.5 times target and acquisitions opportunities aren’t out there, Doft said the company would consider returning cash to shareholders.
Currently, MDC pays out about 25% of its free cash flow in the form of a dividend, or about 3.8% to 3.9%, a dividend Doft calls “fairly healthy.”
“The rest of the cash is essentially for M&A,” Doft said.
To de-lever more quickly in the absence of M&A opportunities, Doft said MDC would not pay down debt. Rather, it would de-lever “through EBITDA growth and managing the net debt-to-EBITDA ratio.”
MDC has $735 million of 6¾% senior notes due in 2020 that are callable in 2016. “If the rate environment stays favorable, we do have an opportunity for potentially an accretive event then,” he said. Refinancing the notes in 2016 also remains a possibility.
The company has a recently expanded $325 million undrawn revolving bank facility priced at Libor plus 200 basis points, a “fairly attractive cost of debt,” according to the CFO.
Doft said the revolver is important “to keep flexibility for working capital swings, which we have on a seasonal basis.”
MDC is a marketing holding company based in New York.
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