- Noreen O'Leary

NEW YORK Interpublic Group has struck a deal with lenders to stay within its loan covenants in the event of a General Motors bankruptcy.

While IPG has little media exposure to the automaker, the holding company is still GM's largest marketing services partner. And many, if not all, of IPG's contracts with GM do not contain sequential liability clauses that protect agencies from unpaid bills of troubled clients.

In an 8-K filing made on May 18 with the Securities and Exchange Commission, IPG said that on May 13, it made a pact with a group of lenders, led by Citibank to preserve its ability to use its $335 million three-year credit line. The amendment allows IPG to exclude up to $150 million of cash charges and $100 million in non-cash charges in its determination of EBITDA (earnings before interest, taxes, depreciation and amortization) under the bank agreement, first signed last July. The original agreement requires IPG to make at least $600 million annually in EBITDA. In the 12 months ended March 31, IPG reported EBITDA of $809.2 million.

IPG said it amended the credit agreement "solely as a matter of sound financial management" and said it has not drawn on any of its corporate credit facilities since 2003, although it uses them to obtain letters of credit to support commitments on behalf of certain clients.

IPG also said it has no non-public information concerning any GM-related bankruptcy proceeding and continues to operate to the full extent of its business relationship with GM.

IPG's exposure to GM, which is approaching a government deadline of June 1 to restructure or file for bankruptcy, has been a focus of Wall Street speculation since the beginning of the year. Last month on the company's first-quarter earnings call, the holding company's CFO Frank Mergenthaler said IPG derives 13 percent of its business from the automotive and transportation sector and reiterated remarks he made in the fourth quarter: In a worse-case bankruptcy scenario, IPG has $150 million in exposure in receivables, work-in-progress and committed media.

However, when pressed, IPG CEO Michael Roth conceded that amount did not include costs associated with shutting down any of IPG's Detroit agencies. The $100 million cited in the latest SEC filing would appear to cover such costs but sources estimate that less than half of the revenue at IPG GM shops like Campbell-Ewald and McCann Detroit now comes from the automaker and it's not anticipated the agencies would be closed but trim costs by doing things like consolidating leased space.

This story updates an item posted yesterday with additional analysis and details.

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