Embattled Interpublic Reaches Terms With Creditors

Pending Sale of NFO Would Help Pay Down $2.9 Billion Debt Load

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NEW YORK (AdAge.com) -- Interpublic Group of Cos., laboring to resolve its debt woes, came to terms with lenders by a crucial deadline today and suspended its dividend.

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New bank agreements will limit Interpublic's ability to make major expenditures or pay dividends till Interpublic's balance sheet and earnings improve. Some restrictions will ease with the pending sale of NFO WorldGroup.

Must raise $400 million
Under new credit terms, Interpublic won't be able to extend an important $500 million, one-year credit line till it raises $400 million from asset sales or other means. But it announced a new interim credit line with UBS Warburg to fill that void.

Under its agreement with lenders, Interpublic will face restrictions on its ability to make capital expenditures, acquisitions, dividend payments and share buybacks. Restrictions will ease as Interpublic sells NFO or other assets, retires debt and improves earnings.

For the first time since the company went public in 1971, Interpublic is suspending its dividend as it looks to conserve cash. Interpublic won't pay the usual quarterly 9.5 cent dividend on March 15. Future dividends will be decided on a quarter-by-quarter basis until credit restrictions are removed.

The dividend move came as little surprise. Advertising Age had reported Jan. 27 that Interpublic could kill or reduce the dividend.

$2.9 billion debt load
In revealing credit arrangements, the embattled agency holding company also formally announced what everybody knew: that it had hired Goldman Sachs to sell NFO. Interpublic is selling the well-regarded market research firm to raise cash needed to pay down its $2.9 billion debt load.

Interpublic appears close to a decision on NFO: Either accept one of several competing bids from owners of rival research firms, or entertain a new round of offers if financial firms, such as private-equity investors, decide to enter the high-stakes bidding. If financial players don't jump in, a sale could happen as soon as this week.

Potential buyer
Since January, the U.K.'s United Business Media has been seen as the favorite to buy NFO. United Business Media's bid is believed to be worth at least $550 million; U.K. rival Aegis is said to have offered less than that.

Interpublic rival WPP Group last week offered $350 million to $400 million and appears unlikely to best United Business Media's bid.

Interpublic bought NFO in 2000 near the peak of the market for $673 million -- $493 million in stock and $180 million in cash. Interpublic is unlikely to get that much. But snaring $550 million in the current market would go a long way toward fixing Interpublic's debt woes.

Faced deadline
A deadline loomed today for Interpublic to come to terms with borrowers. The company is laboring to keep its credit rating above junk status.

Interpublic announced its new credit arrangement after the market closed. Its stock continued to slide today, dropping 29 cents to close at $10.25. That's not much above the $9.85 nadir Interpublic hit in October amid concerns about accounting woes, debt and financial performance. Interpublic's stock market worth now is below $4 billion, vs. nearly $11 billion for rival Omnicom Group.

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