The second fiscal quarter’s come and gone, so it’s worth reviewing how the first half of the year’s played out for radio’s big-fish investment-games:
Clear Channel iHeartMedia: The #1 radio conglomerate in the country just extended its long-term debt refinancing offer to reluctant bondholders for the twelfth time. While going through those motions a key coalition of creditors — who hold more than 10% of iHeart’s $20+ billion debt – have been mulling over the implications of tipping the company into Chapter 11 bankruptcy.
Apparently, they’ve devised a plan by which if they’re given 49% of the company’s equity and more favorable debt-repayment terms, they’ll keep the debt-refinance shuffle going. After missing a full payment in 2016 the company ponied up on schedule this summer toward debt due in 2021. More than $8 billion comes due in 2019.
iHeart’s second-quarter results put big emphasis on revenue growth and platform-performance highlights (our concerts and app rule!), though it does note that the company’s cash interest requirements for this year to service its debt will amount to $1.8 billion. Folks whose homes are on fire don’t typically chat up the fact that some rooms may still be quite lovely since they haven’t burned yet.
Meanwhile, the New York State Broadcasters Association named Bob Pittman its Broadcaster of the Year, as his “views not only shape the radio industry, but the future of all media in this country,” according to NYSBA president David Donovan. That would be terrifying were it actually true.
Cumulus Media: Is staring down the barrel of another delisting. After reverse-splittng its stock in late 2016 to get its share price back above $1, slipped below that point again in late February, and if it doesn’t rebound by October 2 some difficult decisions will have to be made. The company will most likely try to avoid the NASDAQ ax by appealing for an extension of time.
There’s been some interesting intra-day trading patterns and volume on CMLS (now valued at around 35 cents per share), in recent weeks, but nothing that seems strategic. Aggregate station revenue is down.
Incidentally, Cumulus’ former CEO Lew Dickey, who overleveraged the company into the ground during radio’s consolidation-heydays, has mustered a couple hundred million dollars of investor-dough into a loose holding company that he touts as open to media-related acquisitions. Considering that, in 2015, Dickey got unceremoniously ousted while the radio industry’s largest annual convention played out just miles away in his hometown, one might see how a takeover (CMLS total market cap: ~$10 million) would make for a great script. The faith of Dickey’s latest investors doesn’t necessarily have to correlate with his actual record/talents as a media executive; the goal here is to make money, not meaningful media.
CBS/Entercom: Still in the process of consumating this four billion-dollar merger, Entercom CEO David Field is looking to position what is slated become the nation’s #2 broadcaster (in revenue-terms) more firmly into the “digital space” by purchasing 45% of podcast-incubator/marketer DGital Media.
Yet there’s some indigestion-issues with the pending CBS Radio deal. Most notably, Entercom’s share-price has lost a third of its value since its not-technically-for-tax-purposes acquisition of CBS was announced. On its quarterly conference call (for which both Entercom and CBS brass were present), an analyst asked if that might provide grounds to call it off. Tom Taylor calls this “Wall Street’s perception that CBS Radio has issues that will weigh Entercom down,” such as the billion-dollar loan CBS was saddled with (and will be shouldered by ETM shareholders) for early buyouts to the deal-makers and privileged investors.
CBS COO Joe Ianniello responded that “There’s obviously math and things of that nature that are in the deal” which could trigger its dissolution, but CBS is “fully committed to getting this deal done” and will work to “convince investors that that’s the best game in town.” Taylor’s first reaction was blunt: “The truth is, many Wall Streeters are out of touch with radio and the people who own it. The industry’s been off their radar screen for years. And for those folks, the CBS strategic decision to offload its radio division is further confirmation of their judgment that [radio is] a slow-growth/no-growth business they needen’t bother with.”
Since then, CBS Radio notified the Securities and Exchange Commission that the terms of the merger have been slightly amended…to include deadlines by which either party can terminate it (January 31 or May 2, 2018), depending the status of regulatory review. The Department of Justice’s antitrust-analysis of the deal should be complete later this year; the FCC’s expected to pretty much rubber-stamp it.
In order to raise some quick cash, the company’s been trying to sell some assets, such as the spectrum-rights of some of its TV stations (which did not go well) and its office-properties in New York and Los Angeles. The one in L.A. sold this summer for nearly $15 million, representing “probably a 40% discount” off its true value.
Meanwhile, SBS faces staff-friction after its employees voted to join the SAG-AFTRA union last year. According to them, SBS afterward launched a campaign of bullying and mistreatment, firing eight people for their union support and threatening another six. They allege that SBS is flouting minimum-wage laws, arbitrarily scheduling double-shifts while failing to pay overtime, and denying the most basic of workplace rights such as meal breaks. Complaints have been filed with the National Labor Relations Board, but it’s anyone’s guess as if they’ll even see the light of day in an agency controlled by Trump appointees.
In the midst of all of this, the National Association of Broadcasters just wrapped up its annual Radio Show, and none of these topics were chief points of discussion. That’s in large part because the majority of actual radio professionals are wholly disconneced from the finance-capital machinations of the big fish…and also because reality-denial still makes big money in these United States.