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Nielsen Holdings provides early looks for buyout financing; investors point to increased competition, weak credit docs

Nielsen Holdings last month kicked off premarketing efforts with BofA Merrill Lynch for a loan facility to finance its buyout by Brookfield Asset Management and Evergreen Coast Corp, an affiliate of Elliott Investment Management, according to five sources familiar with the situation. During premarketing, prospective investors have voiced concerns related to increased competition in a changing media landscape, combined with execution risk and loose credit documents, said the sources.

The company is an information, data and market measurement firm, specifically tasked with measuring TV ratings. On 29 March, the private equity duo entered into an agreement to take the company private in a transaction valued at USD 16bn, including the assumption of debt, according to a press release.

A consortium of banks, including BofA, Barclays, Credit Suisse, KKR Capital Markets and Ares Capital Markets, have lined up to provide the committed financing to support the LBO.

The two buyers are writing a healthy USD 5.65bn equity check.

The proposed financing package includes a USD 5.355bn seven-year first lien term loan, a EUR 500m seven-year first lien term loan and a USD 650m revolving credit facility, which will be undrawn at close. There is also USD 2.5bn of 7.5-year senior secured first lien notes. Meanwhile, a USD 2.15bn eight-year second lien term loan will be privately placed. Pro forma the deal, the company plans to park USD 200m of cash on the balance sheet.

At the start of premarketing, indicative pricing for the proposed USD 5.355bn term loan was guided at SOFR+ 500bps with a 94 OID, the sources said. But investors have been clamoring for a steeper OID, given the current dislocations in the markets coupled with competitive risks.

The financing is marketed at a pro forma adjusted EBITDA of USD 1.692bn for the LTM period ended 30 June, implying 6.2x total leverage. After stripping out USD 185m in synergies, adjusted EBITDA skates to USD 1.507bn.

For comparison, the borrower booked USD 1.491bn of adjusted EBITDA in 2021 and USD 1.411bn in 2020, according to SEC documents.

Nielsen has been viewed as the global leader and standard bearer in audience measurement, helping it generate a string of earnings stability. It’s no easy feat to replace Nielsen’s services because ad agencies and ad buyers alike depend on its data to establish the cost of TV commercial ads, the sources noted. But prospective investors note that increased competition could fracture its market-leading status.

Case in point, networks and advertisers have been increasingly turning to alternative services, the sources said. A recent VAB survey noted that 175 advertisers were either using or testing new measurement alternatives.

And there are at least a dozen rivals in the space including iSpot, Comscore Media Measurement, Samba TV and VideoAmp. For instance, movie theater advertising network National CineMedia signed on iSpot to gauge audience engagement, according to a 25 August press release.

The heightened competitive landscape comes as the accuracy of Nielsen’s broadcast and cable ratings came under fire following a massive blunder this year with streaming ratings. The company in April said it underreported viewership for Netflix’s movie “Don’t Look Up”.

And prior to that, in September 2021, Nielsen was stripped of its accreditation for local and national TV measurement by the Media Ratings Council.

In legal headaches for the company, Allen Media Group in March filed a lawsuit against Nielsen on allegations of fraudulent misrepresentation and fraud by concealment, according to press reports.

Prospective investors have also pointed to execution risk tied to the rollout of Nielson One, its new cross-platform measurement system. A meeting to review an audit of Nielsen's big data methodology, scheduled for 25 August, was postponed, according to press reports.

But it’s not all negative headlines for Nielsen. The company recently scored a three-year agreement to measure Amazon Prime Video’s NFL Thursday Night Football streaming broadcasts.

Prospective lenders also note there is further downside risk tied to the proposed covenants under the term sheet, the sources added. Investors have taken issue with the baskets, in particular the loose language governing the restricted payment basket and its related ratio carveout. Moreover, the borrower is permitted to designate unrestricted subsidiaries, which are not subject to a closing date leverage test.

Messages left with the company, Brookfield and Elliott were not returned. A BofA representative declined comment.