EXHIBIT 99.1
HOULIHAN LOKEY HOWARD & ZUKIN
INVESTMENT BANKING SERVICES
www.hlhz.com
December 30, 2005
Special Committees of the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
Ladies and Gentlemen:
We understand that Gray Television, Inc., a Georgia corporation
("Gray"), and Triple Crown Media, Inc. ("TCM"), a Delaware corporation and a
wholly owned subsidiary of Gray, are contemplating:
(1) the (i) contribution (the "Contribution") to TCM of all of
the membership interests of Gray Publishing, LLC ("Gray
Publishing"), a Delaware limited liability company, and
certain other assets and (ii) spin-off of TCM to Gray's
shareholders (the "Spin-Off") in a transaction pursuant to
which (A) each holder of Gray's common stock, no par value per
share (the "Common Stock") and Gray's Class A common stock, no
par value per share (together with the Common Stock, the "Gray
Common Stock") will receive 0.1 shares of TCM common stock,
par value $0.001 per share (the "TCM Common Stock"), for each
share of Gray Common Stock that it owns (the "Spin-Off
Consideration") and (B) as partial consideration for the
Contribution, TCM will distribute $40 million to Gray on the
date of the Spin-Off (the "TCM Debt");
(2) the merger of Bull Run Corporation ("Bull Run") with and into
a wholly-owned subsidiary of TCM, whereby (i) the outstanding
shares of capital stock of Bull Run will be converted into
shares of capital stock of TCM or cash, as applicable, as
provided in the Merger Agreement (as defined below) (ii) the
$6.05 million cash advance previously made by J. Mack
Robinson to Bull Run, will be converted into 6,050 shares of
Series B Preferred Stock, par value $0.001 per share of TCM
and (iii) TCM will assume up to $74.1 million of Bull Run's
indebtedness; and
(3) A refinancing by which TCM is to obtain a new credit facility
and use a portion of the proceeds from such credit facility
to refinance all of TCM's and the surviving corporation's
indebtedness concurrently with the merger described in (2)
above.
The transactions described in (1) above are collectively referred to
herein as the "Spin Off." The transactions described in (2) above are
collectively referred to herein as the "Merger." The transaction described in
(3) above is referred to herein as the "Refinancing." The Spin-Off, the Merger
and the Refinancing are sometimes collectively referred to herein as the
"Transaction." The resulting entity formed pursuant to the Transaction is
referred to hereinafter as the "Company".
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Broker/dealer services through Houlihan Lokey Howard & Zukin Capital. Investment
advisory services through Houlihan Lokey Howard & Zukin Financial Advisors.
Special Committees and the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
December 30, 2005
-2-
You have requested that Houlihan Lokey Howard & Zukin Financial
Advisors, Inc. ("Houlihan Lokey") provide an opinion (the "Opinion") to the
Special Committees of the Boards of Directors of Gray and TCM and the Boards of
Directors of Gray and TCM as to the matters set forth below. In rendering the
Opinion, we have valued the Company and the Company's assets, as the case may
be, on a going-concern basis (including goodwill) and on a pro forma basis,
immediately after and giving effect to the Transaction and the associated
indebtedness. For purposes of this Opinion, "fair value" is defined as the
amount at which the Company or the Company's assets (including goodwill), as the
case may be, would change hands between a willing buyer and a willing seller,
each having reasonable knowledge of the relevant facts, neither being under any
compulsion to act, with equity to both; and "present fair saleable value" is
defined as the amount that may be realized if the Company's assets (including
goodwill) are sold in their entirety with reasonable promptness in an arm's
length transaction under present market conditions for the sale of comparable
business enterprises, as such conditions can be reasonably evaluated by Houlihan
Lokey. For purposes of rendering this Opinion, we have used the same valuation
methodologies in determining (a) fair value and present fair saleable value, and
(b) the value of each of the Company and the Company's assets. The term
"identified contingent liabilities" means the stated amount of contingent
liabilities identified to us in writing and valued by responsible officers of
TCM and Bull Run, upon which identification and valuation we have relied without
independent verification; no other contingent liabilities have been considered.
Being "able to pay its debts as they become absolute and mature" means that,
assuming the Transaction has been consummated as proposed, the Company's
financial forecasts for the fiscal years ending June 30, 2006 through 2011
indicate positive cash flow for such period, including (and after giving effect
to) the payment of installments due under loans outstanding immediately after
the Transaction as such installments are scheduled at the close of the
Transaction. We have assumed that TCM's borrowings in connection with this
Transaction will be refinanced on or before their stated maturity dates having
material terms and conditions, no less favorable, taken as a whole. It is
Houlihan Lokey's understanding, upon which it is relying, that the Special
Committees of the Boards of Directors of Gray and TCM and the Boards of
Directors of Gray and TCM and any other recipient of the Opinion will consult
with and rely solely upon their own legal counsel with respect to said
definitions. No representation is made herein, or directly or indirectly by the
Opinion, as to any legal matter or as to the sufficiency of said definitions for
any purpose other than rendering the Opinion.
Notwithstanding the use of the defined terms "fair value" and "present
fair saleable value," we have not been engaged to identify prospective
purchasers or to ascertain the actual prices at which and terms on which the
Company or the Company's assets, as the case may be, can currently be sold, and
we know of no such efforts by others. We express no opinion as to whether the
Company or the Company's assets, as the case may be, could actually be sold for
the amount we believe to be its fair value and present fair saleable value.
In connection with this Opinion, we have made such reviews, analyses
and inquiries as we have deemed necessary and appropriate under the
circumstances. Among other things, we have:
1. reviewed Gray's annual reports to shareholders on Form 10-K
for the fiscal years ended December 31, 2002 through 2004 and
quarterly report on Form 10-Q for the nine months ended
September 30, 2005;
2. reviewed Gray's articles of incorporation, as amended and
restated from time to time, including, without limitation,
the description of the Gray Common Stock;
Special Committees and the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
December 30, 2005 -3-
3. reviewed TCM's historical financial statements for the fiscal years
ended December 31, 2002 through 2004 and interim financial statements
for the nine months ended September 30, 2005 which Gray's management
has identified as being the most current financial statements
available;
4. reviewed Bull Run's annual reports to shareholders on Form 10-K for
the fiscal years ended August 31, 2003 through 2005 which Bull Run's
management has identified as being the most current financial
statements available;
5. reviewed TCM's projected income statements prepared by TCM and Bull
Run management for the Company for fiscal years ended June 30, 2006
through 2011;
6. spoken with certain members of the management of Gray, TCM and Bull
Run regarding the operations, financial condition, future prospects
and projected operations and performance of the Company and regarding
the Transaction;
7. visited certain facilities and business offices of Gray, TCM and Bull
Run;
8. reviewed the following agreements and documents:
a. the Agreement and Plan of Merger, dated as of August 2, 2005, by
and between TCM, BR Acquisition Corp., and Bull Run (the "Merger
Agreement");
b. the Separation and Distribution Agreement by and between Gray and
TCM, dated August 1, 2005, as amended;
c. the Tax Sharing Agreement by and between Gray and TCM dated August
2, 2005;
d. the Certificate of Designation, Preferences and Rights of Series A
Convertible Preferred Stock and the Certificate of Designation,
Preferences and Rights of Series B Convertible Preferred Stock
dated December 29, 2005;
e. the commitment letter from Wachovia Bank and Bank of America dated
July 29, 2005 pertaining to the Refinancing (the "Commitment
Letter");
f. drafts of the First Lien Senior Secured Credit Agreement dated
December 28, 2005, Second Lien Senior Secured Credit Agreement
dated December 28, 2005, and Intercreditor Agreement dated December
28, 2005 (the "Credit Agreements");
9. reviewed Amendment No. 4 to TCM's Registration Statement on Form
S-1/S-4, filed with the Securities and Exchange Commission on November
29, 2005 (the "Registration Statement");
10. reviewed the final proxy statement/prospectus/information statement,
dated November 29, 2005, included within the Registration Statement;
11. reviewed certain materials prepared by Bank of America Securities for
the Board of Directors of Gray in connection with the Transaction;
Special Committees and the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
December 30, 2005 -4-
12. reviewed the respective historical market prices and trading volumes
for publicly traded securities of Gray and Bull Run;
13. reviewed certain other publicly available financial data for certain
companies that we deemed relevant and publicly available transaction
prices paid in other transactions that we deemed relevant for
companies in related industries to TCM and Bull Run;
14. reviewed the certificate of TCM regarding the Company following the
Transaction, addressed to Houlihan Lokey;
15. reviewed the certificate of Bull Run regarding Bull Run prior to the
Transaction, addressed to Houlihan Lokey; and
16. conducted such other financial studies, analyses and inquiries as we
have deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy and completeness of all data, material and other information
(including, without limitation, the financial forecasts and projections)
furnished, or otherwise made available, to us, discussed with or reviewed by
us, or publicly available, and do not assume any responsibility with respect to
such data, material and other information. In addition, we have relied upon and
assumed, without independent verification, that the financial forecasts and
projections provided to us by management of TCM and Bull Run have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the future financial results and condition of TCM, Bull Run
and the Company, and we express no opinion with respect to such forecasts and
projections or the assumptions on which they are based. We have relied upon and
assumed, without independent verification, that there has been no material
change in the assets, liabilities, financial condition, results of operations,
business or prospects of TCM and Bull Run since the date of the most recent
financial statements provided to us, and that there is no information or facts
that would make the information reviewed by us incomplete or misleading.
We have relied upon and assumed, without independent verification, that
(a) the representations and warranties of all parties to the agreements
identified in item 8 above and all other related documents and instruments that
are referred to therein are true and correct, (b) each party to all such
agreements will perform all of the covenants and agreements required to be
performed by such party, (c) all conditions to the consummation of the
Transaction set forth in such agreements will be satisfied without waiver
thereof, and (d) the Transaction will be consummated in a timely manner in
accordance with the terms described in the Separation and Distribution
Agreement, the Merger Agreement, the Commitment Letter and the Credit Agreement
provided to us, without any amendments or modifications thereto or any
adjustment to the aggregate consideration (through offset, reduction, indemnity
claims, post-closing purchase price adjustments or otherwise). We have also
relied upon and assumed, without independent verification, that all
governmental, regulatory, and other consents and approvals necessary for the
consummation of the Transaction will be obtained and that no delay,
limitations, restrictions or conditions will be imposed that would result in
the disposition of any material portion of the assets of the Company, or
otherwise have an adverse effect on the Company or the expected benefits of the
Transaction. Notwithstanding the preceding sentence, we understand that the
Company may be required to divest or exchange The Goshen News as summarized in
the Registration Statement. For purposes of this Opinion we have been
instructed by TCM to assume that The Goshen News will be exchanged for a
property with reasonably similar cash flow characteristics. In addition, we
have relied upon and assumed, without independent verification, that the final
forms of any draft agreements identified above will not differ in any material
respect from such draft agreements.
Special Committees and the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
December 30, 2005 -5-
Furthermore, we have not been requested to make, and have not made, any
physical inspection or independent appraisal of any of the assets, properties or
liabilities (contingent or otherwise) of TCM (including assets, properties
and/or liabilities to be contributed to TCM in connection with the Transaction),
Bull Run or the Company, nor were we provided with any such appraisal or
evaluation. We have not been requested to, and did not, (a) initiate any
discussions with, or solicit any indications of interest from, third parties
with respect to the Transaction, assets, businesses or operations of TCM or the
Company, or any alternatives to the Transaction, (b) negotiate the terms of the
financing for the Transaction, or (c) advise the Board of Directors with respect
to alternatives to the Transaction. This Opinion is necessarily based on
financial, economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. We have not undertaken,
and are under no obligation, to update, revise, reaffirm or withdraw this
Opinion, or otherwise comment on or consider events occurring after the date
hereof.
This Opinion is furnished for the use and benefit of the Special
Committees of the Boards of Directors of Gray and TCM and the Boards of
Directors of Gray and TCM in connection with the Transaction and is not
intended to, and does not, confer any rights or remedies upon any other person,
and is not intended to be used, and may not be used, for any other purpose,
without our express, prior written consent.
In the ordinary course of business, we and our affiliates may acquire,
hold or sell, long or short positions, or trade or otherwise effect
transactions, for our and such affiliates' own accounts and for the accounts of
customers, in debt, equity, and other securities and financial instruments
(including bank loans and other obligations) of Gray, TCM, Bull Run and any
other party that may be involved in the Transaction.
Houlihan Lokey, or its affiliates, have provided certain other
financial advisory and investment banking services for Gray and TCM and have
received fees for rendering such services, and we may continue to do so in the
future. We further advise you that Houlihan Lokey Howard & Zukin Capital, Inc.
("HLHZ"), an affiliate of Houlihan Lokey, was retained to act as the financial
advisor to the Special Committee of the Board of Directors of TCM. TCM, on
behalf of the Special Committee of the Board of Directors of TCM, will pay HLHZ
a fee for its services as financial advisor to the Special Committee of the
Board of Directors of TCM, a portion of which is contingent upon the
consummation of the Transaction. In addition, we will receive a fee for
providing this Opinion. TCM has agreed to reimburse us for expenses and
indemnify us and HLHZ against certain liabilities and expenses.
We have not been requested to opine as to, and this Opinion does not
address: (i) the underlying business decision of Gray, TCM or their respective
security holders or any other party to proceed with or effect the Transaction,
(ii) any portion or aspect of the Transaction not expressly addressed in the
Opinion, (iii) the fairness of any portion or aspect of the Transaction to the
Company, the holders of any class of securities, creditors or other
constituencies of the Company, or any other party, (iv) the relative merits of
the Transaction as compared to any alternative business strategies that might
exist for the Company or the effect of any other transaction in which the
Company might engage, (v) the tax or legal consequences of the Transaction to
either Gray, TCM or their respective security holders, or any other party, or
(vi) whether or not the Company, Gray or TCM security holders or any other
party is receiving reasonably equivalent value in the Transaction. Furthermore,
no opinion, counsel or interpretation is intended in matters that require
legal, regulatory, accounting, insurance, tax or other similar professional
advice. It is assumed that such opinions, counsel or interpretations have been
or will be obtained from the appropriate professional sources.
Special Committees and the Boards of Directors of
Triple Crown Media, Inc. and
Gray Television, Inc.
December 30, 2005
-6-
Based upon and subject to the foregoing, and in reliance thereon, it is
our opinion as of the date hereof that, assuming the Transaction has been
consummated as proposed, immediately after and giving effect to the Transaction
and on a pro forma basis: (a) the fair value and present fair saleable value of
the Company's assets would exceed the Company's stated liabilities and
identified contingent liabilities; (b) the Company should be able to pay its
debts as they become absolute and mature; and (c) the capital remaining in the
Company would not be unreasonably small for the business in which the Company is
engaged, as management has indicated it is proposed to be conducted following
the consummation of the Transaction.
HOULIHAN LOKEY HOWARD & ZUKIN FINANCIAL ADVISORS, INC.