The Yankee Group may be predicting that TiVo won’t be around in 2010, but apparently, Citigroup doesn’t share the same dismal outlook. According to an 8K filing, TiVo announced that they’ve negotiated a new $50 million revolving line of credit with the bank. The line of credit will remain in effect until TiVo terminates the arrangement, violates the covenants or January 25th, 2010, whichever one comes first.
In the filing, TiVo indicated that they have the option of going back and requesting an additional $50 million be added to the line of credit if they needed it, but for the time being, they have no plans to borrow any of the money from the new loan. The line of credit replaces a $15 million loan with the Silicon Valley Bank that expired last September.
The terms and conditions on the loan impose standard debt restrictions in how TiVo can operate their business, but two notable features of the loan are the restrictions that could prevent TiVo from entering into certain M&A negotiations and the formula used for the interest rate calculation.
TiVo already has a poison pill in place, that all but ensures the company won’t be bought out in a hostile takeover scenario. To add to this, they also have language in both their Comcast and Cox agreements, that allow either company to terminate their cable deals, if TiVo is acquired by another company. While the inclusion of this type of language isn’t unusual for a loan of this nature, it existence is further proof that TiVo isn’t interested in selling the company, unless it’s on their terms.
In regards to the interest rate calculations on the loan, the revolving line will have a floating interest rate of 4% + the 1 month LIBOR. With the 1 month LIBOR currently at 5.32%, this would imply a borrowing cost of 9.32%, if TiVo does end up accessing the line of credit it would need to be for working capital needs. If TiVo ends up defaulting on the loan, then immedietely the interest rate would jump up 2%, but would then remain fixed. Borrowing wouldn’t be cheap, but it’s nice knowing the gun is loaded, in case you ever need it.
With $78 million in cash and another $28 million in short term investments, I somehow doubt that TiVo will ever make heavy use on this line of credit, but it’s mere existence should help to reassure nervous shareholders. I think that a lot of the doom and gloom on TiVo has been overdone, but with most of the analysts pretty dour on TiVo’s prospects, access to another $50 million in cash should help to soothe investors who have been concerned about TiVo’s near term ability to survive. Previously, Citigroup had helped TiVo to raise $65 million in a secondary stock offering and the extension of their line of credit serves as a indication of their commitment to helping TiVo succeed.
In a separate 8K filing, TiVo also announced the addition of Jeffrey Hinson to their Board of Directors. Hinson had previously worked as the CFO of Univision, but resigned a little more than a year and a half ago to “pursue other interests in Dallas where he and his family reside.” TiVo is of course, located a little far from Dallas, but given the amount of time the company is spending on their patent dispute with Echostar, Texas is probably beginning to feel like a second home to the company.
Hinson will become the 9th member to TiVo’s board and should serve as an excellent complement given his background in Hispanic media. With TiVo having recently announced a cable partnership with Cablevision S.A. de C.V, he is certain to play a role in acquiring Spanish TiVoCast content and in advising the company on it’s Latin American growth plans. In addition to serving on TiVo’s board, Hinson also severs on the board of telecommunications company, Windstream Corp.
Davis Freeberg is a technology enthusiast living in the Bay Area. He enjoys writing about movies, music, and the impact that digital technology is having on traditional media. You can read more of his coverage on technology at www.davisfreeberg.com. Davis owns shares of TiVo stock.