Q&A: An Active Acquirer's Banking Needs

Paxson Communications has gotten off to a running start this year, making more than $80 million worth of acquisitions so far.

Arthur D. Tek, Paxson's chief financial officer, has used various markets in the last few years to fuel the company's growth. To fund its most recent deals, Paxson tapped a $200 million senior line of credit arranged in December by Union Bank of California.

A West Palm Beach, Fla.-based owner and operator of radio and television stations, Paxson currently has more than $500 million in assets, up from slightly less than $300 million at the end of 1995.

In an interview with American Banker, Mr. Tek discussed his banking relationships and what he expects from his primary institutions.

*

What do you look for from your lead commercial banks?

TEK: On the senior loan side, we're looking for banks that intend to stay for a long time, who understand cycles. Advertising and the (broadcast) industry are hurt by a recession as much as anything.

How do you choose a lead bank?

TEK: You want folks who understand your business and your particular company. Our company does not have net accounting income. We're a cash flow company. Bankers have to understand that. And, we want them to protect themselves risk-wise, but remain flexible and timely in terms of any covenant waivers we might need.

How important is pricing in your deals?

TEK: We want pricing to be competitive and to be on market. Ultimately, we don't drive pricing as hard as we do service, reliability, and flexibility from both underwriters and commercial banks.

How often do bankers call on you?

TEK: We're one customer that doesn't mind getting the phone calls. I'd like all of the banks to call me more often than they do. I want any ideas that they have, any reconnaissance and intelligence in the industry. They are talking to a lot more different broadcasters than I am.

Fairly big banks call us once a month. There are more banks in our existing facility than would have been optimal from an administrative point of view but we don't like turning banks away. We always assume that we'll continue to grow, and it helps to have dry powder in the gun.

Bill Archer, a media specialist at Bankers Trust, sits on your board. What is you relationship with that bank?

TEK: They had been lenders to us at a point in time, but their desire was not to be long-term lenders. They are not a lend-and-hold institution. They have expressed a desire to agent our loans in the past, but we wanted an agent that was going to hold a significant part of the loan and be in it for the long term.

We continue to have an excellent relationship with Bill Archer.

What do you think of investment banks in the loan syndication business?

TEK: The Wall Street firms are providing that as another service to their clients. They are looking to make money from the fees, but I don't know that they see the long-term lending relationships as primary business.

When we were first starting out with one part of our company, which shows infomercials on TV stations, Merrill Lynch stepped up and led $75 million in financing. We utilized that at that time. But, our company has grown to a size where it's attractive to the commercial banks that have media lending departments. We have a very good market for that right now.

What do you think of commercial banks in the high-yield-bond and other investment banking businesses?

TEK: We've had a very good history there with both (Canadian Imperial Bank of Commerce) and Bankers Trust. They both led successful high yield offerings for us. We've worked more with commercial banks that have crossed over into investment banking than with investment banks that have crossed over into commercial banking.

Is the bank or the banker more important to you?

TEK: It's the banker that's more important, provided that the institution has enough power to do what it needs to do. For instance, we've used three different leads in three underwritings. We might seem unstable in that regard. But in each case, we built up a relationship with an individual.

What do you look for in an individual banker?

TEK: We want the banker to think of the company first.

The ultimate self-restraint is a banker who says we could go out to the market, but now is not the right time. That happened with Michael Anderson at Smith Barney. We could gone public with common equity six months sooner, but he advised us to wait.

What concerns you about banks?

TEK: A whole group of people left from one of our co-underwriters on an offering. That's the kind of stuff you don't want to see. You want to see the guy you've dealt with there moving up, having more power within his or her organization.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER