WASHINGTON (Dow Jones)--Snyder Communications Inc.'s (SNC, news, msgs) Internet
business division doesn't have sufficient cash on hand to fund its operations through the end of
1999, according to a recent quarterly report filed with the Securities and Exchange Commission.
Snyder, of Bethesda, Md., said in the report filed on Monday that Circle.com (CIRC, news,
msgs) will require additional cash to fund its growth and operating losses over the next year and
beyond. The Internet business will need to obtain additional funding from Snyder, borrow money
from a third party, or Snyder Communications may need to issue more shares of Circle.com
stock. (On Oct. 25, Snyder Communications issued stock tracking the performance of
Circle.com.)
However, if Snyder Communications issues additional shares of Circle.com stock, then there
could be a dilution of the interests of existing Circle.com stockholders.
Further cash provided to Circle.com by Snyder Communications will be considered an
interest-bearing loan from Snyder or a capital contribution resulting in an adjustment in Snyder's
retained interest in Circle.com.
If Snyder must borrow cash to fund Circle.com it would result in an allocation of Snyder's debt
and interest expense to Circle.com. Circle.com relies solely on Snyder Communications for
operating cash.
Snyder said that in August it entered into a $195 million revolving credit facility. The company
intends to use the four-year unsecured credit facility for acquisitions and general corporate
purposes as well as the repurchase of up to $250 million of Snyder Communications' common
stock.
The new credit facility bears interest based on the London Interbank Offered Rate, the lending
bank's base rate of interest or the federal funds rate.
On Sept. 30, there was $145 million in outstanding borrowings under the facility at a weighted
average interest rate of 6.7%.
Snyder Communications provides integrated marketing communications and interactive services
through several of its units.
-Carrie DeLeon; Dow Jones Newswires/Federal Filings Business News; 202-628-7663
Quote for referenced ticker symbols: CIRC, SNC
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