Nexstar Says It Can’t Fully Comply With Tegna Merger’s Temporary Restraining Order

Nexstar says it is unable to fully comply with a temporary restraining order against its $6.2 billion merger with rival Tegna because of actions that were already completed at closing and legal obligations that can’t be reversed.

“Upon closing, Nexstar and Tegna took many typical steps that may not have been apparent to the Court when it issued its TRO. It is particularly difficult to freeze integration that was already taking place, unlike a conventional hold-separate order,” Nexstar said in a court filing on Tuesday. “Complying with certain aspects of the TRO is impossible and could jeopardize Nexstar and the Tegna assets the Court seeks to preserve.”

It warned that the order creates “immediate operational harm,” regulatory conflicts and a “governance vacuum.”

The filing states that the “administrative integration cannot be reversed without significant disruption to employee compensation.” Nexstar also said it has “ongoing SEC and debt agreement reporting obligations that require the inclusion of Tegna’s financial information into Nexstar’s reports from the date of closing.”

Additionally, Nexstar said that Tegna’s retransmission agreements with pay-TV providers that also carry a Nexstar station “were contractually superseded by Nexstar agreements.” The issue creates an “internal contradiction” with the TRO as the Tegna stations are “now contractually governed by Nexstar’s agreements to which no former Tegna personnel are privy.”

“News of the TRO has already created confusion of its impact on the applicability of the Nexstar agreements to the Tegna stations, and Nexstar has begun to receive questions from distributors that will accelerate in volume and urgency as Nexstar approaches the end of the month billing cycle,” the filing adds. “This creates operational chaos and accounting complexity that harms both Nexstar and Tegna.”

As for regulatory conflicts, Nexstar says that the FCC ordered the company to divest six stations, increase news programming in certain markets and offer an extension to MVPDs with an existing retransmission agreement that expire between the merger’s closing and Nov. 30.

“The FCC accepted these commitments as enforceable conditions of Transaction
approval,” the filing states. “If Nexstar speaks for TEGNA to honor the FCC’s rate-extension commitment, Nexstar would appear to violate the TRO.”

It notes that the scope of distribution agreements requiring renewal in the near term is “substantial” and that the TRO could be violated if Tegna personnel are required to manage the now-governing Nexstar contracts.

It also said that the TRO threatens to “disrupt valuable joint programming that benefits local communities.” Nexstar said it plans to provide Tegna stations with access to its Washington, D.C. news bureau ahead of the midterm elections and that depriving those stations of access to that content under the TRO “does not preserve competition—it eliminates benefits that were beginning to flow to those stations and their viewers.”

As for staffing and headcount, Tegna announced a $90 million to $100 million cost reduction between February and June of 2024 that would eliminate positions and support positions, consolidate station operations and management, and develop technologies like AI automation. It also made additionally layoffs this year.

But under the TRO, Nexstar says it is “unclear whether Tegna is required to operationalize its pre-Transaction reduction plans — or is prohibited from doing so — to maintain current staffing levels or even increase staffing levels to their 2025 peak, which could harm Tegna financially.”

In order to address these various issues and mitigate some of the “irreparable harm” to the combined company, Nexstar has proposed nine clarifications or modifications to the TRO. They include the following:

1. Debt and Cash Management: The TRO (paragraphs 1, 2, 4, 5, 9, and 10) shall allow Nexstar to undertake ordinary-course cash management, intercompany transfers, and debt service and repayment activities necessary to comply with Nexstar’s financing obligations, including refinancing activities, security perfection, and guaranty obligations. This includes permitting intercompany loans and cash management arrangements necessary for TEGNA to access working capital and for the combined enterprise to service its debt obligations, as well as completion of the required post-closing security perfection process and avoidance of default under Nexstar’s debt instruments.
2. Corporate Governance and Operational Control: The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow Nexstar to take reasonable actions necessary to maintain TEGNA’s day-to-day operations, including authorizing routine financial transactions such as wire transfers for ordinary course payments, without violating the TRO’s prohibition on “influence.”
3. Distribution Agreements and Retransmission: The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow the continued administration of existing retransmission agreements, the handling of payments, or necessary discussions relating to expiring contracts and fulfilling the commitments under the FCC Order, and does not require unwinding or invalidating contractual provisions recognized pre-closing that occurred at closing.
4. Corporate Governance Structure and Officer Authority: The TRO (paragraphs 1, 2, 4, and 6) shall allow Nexstar to take actions necessary to establish a functional governance structure for TEGNA, including appointing or reappointing officers, to the extent necessary to permit TEGNA to fulfill the TRO. It shall not be considered “influence” for Nexstar to provide and implement Sarbanes-Oxley requirements, including setting thresholds for contract approval, expenditure authorization, and other financial limits similar to the interim operating covenants that applied to TEGNA’s independent management of the business pre-closing.
5. Financing and Reporting Obligations: The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow Nexstar to take all reasonable steps to perform all obligations required under its debt instruments, SEC reporting requirements, or refinancing transactions, including coordination with TEGNA personnel as necessary. This includes permitting Nexstar to complete required SEC and debt agreement reporting for the combined company within applicable deadlines, oversight by Nexstar management as to the accuracy of the TEGNA financial statements, including compliance with internal controls and procedures, in coordination with TEGNA personnel.
6. Management Authority and “Ordinary Course” Operations: The TRO (paragraphs 1, 2, 4, and 6) shall allow Nexstar to take actions necessary to ensure TEGNA’s continued operations, including officer appointments, contract administration, and responses to third-party requests.
7. Corporate Governance and Officer Authority: The TRO (paragraphs 1, 2, 3, and 4) shall allow Nexstar to appoint or reappoint TEGNA officers as necessary for TEGNA to exercise independent decision-making authority for retransmission matters.
8. Employee Compensation and Workforce Decisions: The TRO (paragraphs 1, 2, 3, 4, and 5) shall allow TEGNA to the extent necessary to proceed with pre-existing, ordinary-course compensation and workforce actions, including merit-based salary adjustments and related payroll actions planned prior to the Transaction.
9. Interim Operating Covenants: To provide appropriate guardrails for TEGNA’s operations over the coming days and limit its ability to make financial commitments beyond the typical obligations of a subsidiary, the interim operating covenants set forth in the Merger Agreement (Biard Decl. Ex. C) shall govern what actions TEGNA may take without Nexstar’s input or approval.

However, they warned that the proposals do not full address the potential harms to the combined company and are not sustainable beyond the preliminary injunction hearing. The hearing is scheduled for Tuesday.