After spending several years shuffling money between subsidiaries (including creating new ones to raise/preserve capital) and playing footsie with creditors holding more than $20 billion dollars of its debt, iHeartMedia, the nation’s largest radio conglomerate, skipped a scheduled $106 million interest payment on some of its loans earlier this month, triggering a 30-day default-clock. iHeart is portraying this move as something done to increase its leverage over creditors, who might be compelled to agree to new terms and avoid restructuring – but this is precisely what tripped Cumulus Media into Chapter 11 bankruptcy late least year.
None other than the Wall Street Journal calls what’s likely to happen between now and March 3 a “costly reckoning.” If iHeart follows the Cumulus bankruptcy model, preferred (institutional) investors will get a greater share of the restructured company, while others will lose everything. The firms who took iHeart private last decade may not be compensated at all in restructuring, but the WSJ reports that they’ve already “managed to offset virtually all of the potential loss of iHeart’s equity,” and will generally be able to walk away after more than doubling the company’s debt in the buyout process. Continue reading “iHeartMedia Bankruptcy Reorganization Imminent”
Category: AM Radio
Cumulus Goes Chapter 11; How Long for iHeart?
Bloated with more than $2 billion dollars in debt racked up in the wake of the late 90s-early 00s radio station consolidation orgy, Cumulus Media has finally taken the plunge into Chapter 11 bankruptcy reorganization. The path from there to here began when Cumulus hired Mary Berner as the CEO in 2015 – primarily for her prowess in shepherding Reader’s Digest through the Chapter 11 process back in 2009, when that company carried a nearly identical amount of debt.
Things got real back in September, when the Wall Street Journal reported that the company had begun negotiations with creditors who hold “big chunks” of the company’s debt. This was prompted in part by the company’s pending delisting from the NASDAQ stock exchange after CMLS shares trended below $1 and stayed there; the company’s net equity had previously fallen below the NASDAQ minimum, which is also a delistable event.
Then Cumulus intentionally skipped a $23 million interest-payment on its debt that was due November 1. It told the Securities and Exchange Commission it did this “in support of the Company’s efforts to develop and implement a restructuring that will allow the Company to continue its operational and financial momentum,” and noted that the missed payment would trigger a default after 30 days.
In a memo to staff, CEO Berner was frank about the fact that “we can’t fully turn the company around until we reduce our excessive debt-load,” and that skipping the payment would incentivize creditors to compromise to avoid default. Continue reading “Cumulus Goes Chapter 11; How Long for iHeart?”
Big-Fish Radio Capital Shaky in 2017
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. Continue reading “Big-Fish Radio Capital Shaky in 2017”
iHeartMedia At Debt Wall
Looks like the time is nigh for Clear Channel iHeartMedia to pay the piper.
Those who hold a significant portion of iHeart’s $20+ billion in debt are balking at the company’s attempt to kick the can down the road. This spring, iHeart floated proposals to creditors to extend the time the company gets to pay back on its debt while pegging a higher interest rate and some equity to the revised payback-plan. The offers were roundly rejected – fewer than 1% of existing note-holders accepted the terms, and now the company’s repeatedly extending the deadline to creditors hoping they will accept it. Continue reading “iHeartMedia At Debt Wall”
Radio Finance Capital: Dominos Aligning
It’s not a long line of dominos – just three in particular – but if they begin to fall you can bet there’ll be collateral damage throughout the radio industry.
The most wobbly of the three is Cumulus Media. The #2 radio station conglomerate in the country by stations owned, the company just can’t get a break with its turnaround endeavors. After an 8-to-1 reverse stock split last year which temporarily raised its share-price above the critical $1 floor for listing on NASDAQ, the company’s gone underwater again. Thursday’s trading-close saw CMLS shares at just under 27 cents, making for a total market capitalization just above $8 million. That’s about half of what it was just a month ago. Earlier this month, NASDAQ started the delisting-clock again, which means Cumulus has six months to implement a revival-plan and stick to it.
Of course, the aggregate value of Cumulus’ hundreds of radio station licenses is multiples higher than the market value of its stock, but most definitely not enough to cover the $2+ billion in debt it carries. A refinancing proposal using stock imploded last month, prompting Bill Cunningham in Media Life (just before it shut down) to observe that “Unless some white knight comes along, Cumulus has no choice but to file for bankruptcy protection. It could come in a matter of weeks.” Continue reading “Radio Finance Capital: Dominos Aligning”
Radio Industry's Money-Flings
The money-shuffle has intensified in the radio industry as of late:
Clear Channel iHeartMedia: Still saddled with more than $20 billion in debt – of which more than $8 billion comes due in 2019 – the company’s going to great lengths to shuffle revenue between its subsidiaries to keep on top of its obligations. The latest move involves iHeart’s outdoor billboard division, one of the more financially solvent of the bunch, turning over nearly 90% of its latest quarterly dividends to the parent company.
In addition, iHeart filed papers with the Securities and Exchange Commission recently regarding the potential for its outdoor division to acquire the intellectual property to the words “Clear” and “Channel.” This sounds like the corporate version of scrounging for change in couch cushions; no word on how much those two words, separately or in conjunction, might actually fetch.
iHeart’s recent debt-exchange, for which it traded notes due in 2018 for paper payable in 2021, was classified by Moody’s Investor Services as a combination “distressed exchange (DE) and a Default due, in part, to the extension of the maturity date beyond its initial terms and the company’s very high leverage levels,” further observing that “the company will remain poorly positioned to withstand an economic recession or any material weakness in terrestrial radio in the future.” Continue reading “Radio Industry's Money-Flings”
iHeartMedia, Cumulus Go Debt-Offensive
How many ways can you keep debt at bay? Does non-payment sound like a viable option? Perhaps not if you’re just a mere flesh-and-blood human, but the corporate beast’s a special class.
Over at iHeartMedia, $250 million of the company’s $20+ billion debt came due last Thursday (December 15). In a surprise move, the company announced two days before that it would only be paying back just $192.9 million of these notes and foregoing the rest.
The reason? This debt constitutes money that various subsidiaries of iHeartMedia owe to each other. In addition, these particular debt instruments contain a provision that, should the total debt held between these entities fall below $500 million, it would trigger a “springing lien.” This is a fancy term for extra payments owed to debtors as an incentive for giving the conglomerate a nice line of credit.
By witholding $57.1 million of these payments, iHeartMedia’s total debt in this instance doesn’t fall below the threshold, and thus the company can avoid making the bonus-payments to creditors. To stymie any objection to this ploy, iHeart went to the friendly Bexar County, Texas courts and filed a flurry of paperwork last Monday (to give you an idea of how complex its debt structure is, there 11 petitions in all, involving six Clear Channel iHeart subsidiaries), asking a judge to declare this practice kosher. Continue reading “iHeartMedia, Cumulus Go Debt-Offensive”
Radio Stocks Spice Books for Year's End
Borrow $1,000 from the bank, and the bank owns you. Borrow $100 million, and you own the bank. This seems to be the mantra for end-of-year finance-maneuverings in the U.S. radio sector. Three companies in particular are making plays:
1. Clear Channel iHeartMedia: After beating back a default-notice earlier this year by some creditors to whom the company owes more than $20 billion in debt, run up in the post-1996 consolidation and acquisition-frenzy, another lawsuit filed in Delaware accusing iHeart of playing fast-and-loose with debt-swapping between subsidiaries has been dismissed.
This has emboldened the company to seek a further renegotiation of a portion of its debt-payments. In a statement released late last month, iHeart announced that it’s asked some investors for the flexibility to “amend their terms,” according to the Tom Taylor Now newsletter. If iHeart gets consent, it may attempt to revise the interest rates on these debt-notes, or swap the notes down the road for other debt instruments at more manageable terms. One anonymous watcher tells Tom that if the company is successful, iHeart’s “debt wall,” or the point where the company ceases to be able to make adequate payments on what it owes, might be pushed back “until at least 2018, maybe 2019.” Continue reading “Radio Stocks Spice Books for Year's End”
Translators Now Constitute the Largest Number of U.S. Radio Stations
Revisiting a subject from three years ago: the health of U.S. radio by the FCC’s broadcast station totals. Published quarterly, these figures over time show the relative growth of station-classes, and trends especially over the last couple of years are quite eye-opening.
What sparked my interest was a celebratory missive from FCC Media Bureau Chief Bill Lake released last week. Having completed two filing-windows this year allowing AM radio stations to acquire FM translators, Lake says they’ve been a “resounding success” – nearly 1,100 translators changed hands, and the FCC has already signed off on the vast majority of these deals.
The chart above tells the tale, tracking station-counts over the last 25 years. As of this year, FM translator and booster stations now comprise the largest segment of licensed radio stations in the country, both in raw numbers and percentage. Continue reading “Translators Now Constitute the Largest Number of U.S. Radio Stations”
Thanks to Translator-Mongering, AM Broadcasters Now Openly Advocating Band's Abandonment
It’s still more than two months away, but in late November Americans will sit down with their families/friends and gorge themselves on food, then satedly lounge around giving thanks for their bounty. The U.S. radio industry’s going through that process presently, having spent most of the year scarfing up and then trading around FM translator stations.
In quick summary: FM translators are a class of radio station limited to a broadcast power of 250 watts but unlimited in antenna height (the key factor for good FM coverage). They are considered secondary services, in that they must rebroadcast another radio station. For decades, translators have been used as stand-in broadcast nodes by interests who wanted to build out radio networks on the cheap — by and large, these have been religious and public broadcasters who pipe in programming via satellite to air on a translator. Translators don’t require any staff and since they don’t originate their own programming all they need is a shack for the RF-boxes and a tower nearby.
This all began to change last decade when, after a multi-year freeze on new translator stations in order to implement the LPFM radio service, the FCC opened a filing window for new translators in 2003. Several cunning parties were well-prepared for this opportunity, flooding the agency with tens of thousands of translator applications — a 250-watt FM spectrum gold rush. Out of these came thousands of new translator stations, which in the intervening years have been fodder for speculative development of the FM dial around the country. Continue reading “Thanks to Translator-Mongering, AM Broadcasters Now Openly Advocating Band's Abandonment”