FORT MILL — Muzak Holdings, the Fort Mill provider of background music to businesses, is talking with its bond holders and lenders about restructuring $440 million worth of debt that is due between February and March.
The company also is reviewing "all strategic opportunities," spokeswoman Meaghan Repko said Friday.
Businesses that examine such options often look at reorganization under Chapter 11 bankruptcy protection as one of those options. When asked if Muzak was considering filing for bankruptcy protection, Repko repeated that the firm is looking at all opportunities.
Muzak has about 1,250 employees, with 550 in Fort Mill. The company also confirmed Friday it laid off "fewer than 30 people." Those layoffs, which occurred this month, involve Fort Mill workers.
In a statement, Muzak called the decision difficult but necessary. "We are confident that we are taking the appropriate steps to realign our cost structure to reflect the current market environment."
Muzak designs and installs professional sound systems for businesses and provides a range of other services, such as promotional music for corporate branding. Muzak said its programming reaches more than 100 million people daily, and has a catalog of more than 2.6 million songs. The company is marking its 75th anniversary this year.
Earlier this week, the company said it got a 22-day extension on a $105 million secured bank debt that is due Feb. 10. It has a $220 million bond payment due Feb. 15 and a subordinate bond payment of $115 million due March 15.
The company also said it has sufficient cash on hand to support its business; Muzak reported more than $25 million cash on hand as of Dec. 17.
But the size of the debt that is due this quarter is what has led the company to try to restructure the debt.
Standard & Poor's has downgraded the rating on Muzak's debt in recent months and now gives it a rating of "CCC-," its second-lowest category next to a default rating. The outlook on the rating is negative.
"Muzak's financial risk is high, driven by very high debt and the large amount of upfront cash needed to acquire new customers," Standard & Poor's stated in an analyst's report last month.
"The rating reflects the probability there may be a near-term default of the obligation," analyst Hal Diamond said. What happens after that is unclear and depends on how negotiations go, he said, adding, "Sometimes (Chapter 11) is unavoidable."
Muzak has been trying to merge with a competitor, DMX of Texas, in the hopes that a third party would buy the combined group. But in a November conference call for analysts, Muzak CEO Steve Villa said the deal was taking longer than hoped because of the state of financial and credit markets.
The company reported net revenue of $61.8 million for the third quarter of last year, compared to $62.1 million for the same period in 2007.
An increase in business closures and chains shuttering certain locations because of the economy has contributed to an increase in Muzak's cancellation rate, Villa told analysts. But he said the company is helped by having a client base that is diverse in location and type of business.