IPG’s New Loan Terms Prohibit Dividends

NEW YORK The new agreements that Interpublic Group forged Monday with its lenders prohibit the company from paying dividends, buying back shares and making capital expenditures. They also “limit the ability of domestic subsidiaries to incur additional debt,” IPG said.

Those restrictions, however, may be loosened or lifted, if IPG makes certain financial progress. For example, if the company should realize more than $400 million in net proceeds from the sale of assets, IPG will have the ability to pay limited dividends.

For the time being, however–and specifically on March 15, the next scheduled dividend period–no dividends will be paid. And thereafter, the dividend policy will be determined on a “quarter-by-quarter basis until these restrictions are lifted,” IPG said.

In addition to renegotiating lines of credit with three lenders, IPG struck a deal with UBS Warburg by which UBS has agreed to provide “interim credit” of $500 million. “This commitment will lapse at such time as the company is in receipt of net proceeds greater than $400 million from either asset sales or a future capital markets transaction,” IPG said.

The new credit line is a “security blanket” that shows that other financial institutions are willing to lend money to IPG, a source said. In effect, it covers the company until it sells NFO WorldGroup, the market research firm it recently put on the block. IPG, which paid about $624 million for the firm in 2000, is seeking up to $575 million from potential suitors, which include United Business Media, Ipsos and Aegis (Adweek, Feb. 10).