Problems with Debt
Cumulus Media, owner of 447 radio stations nationwide including KABC (790 AM) and KLOS (95.5 FM) locally, was dealt a huge blow last week in its effort to reduce its debt. Reuters reports that a federal judge rejected a plan that would have allowed the company to exchange a portion of its $2.4 billion in debt with … other debt.
The plan involved exchanging “senior notes,” or loans that are soon due to be paid back, for “a combination of stock and up to $305 million in secured debt borrowed through a $200 million revolving credit line.”
I would love those terms. If I could borrow $305 million from a $200 million line of credit, I could pay off the entire line of credit and still have $105 million. Hmm…
The real question, other than the financial sleight of hand that this entire deal seems to be, is: can Cumulus use a line of credit to help it pay down older debt at a discount? Major debt holder J.P. Morgan said no, and the judge agreed. What happens next could decide the fate of Cumulus Media as a company and the repercussions may be felt throughout the industry, as iHeart, the largest radio company in the world, also carries a huge debt load.
If Cumulus is unable to refinance by March 13, a previously-reached agreement with the majority of debtholders will expire; if that agreement expires, it could trigger what is described as a “springing maturity” of debt that could easily bankrupt the company.
Here is what I don’t understand. I’ve done a few columns on the idea of someone like me buying Cumulus outright. As I write this, Cumulus stock sits at just under 76 cents per share, giving it a total market value of just over $22 million. My plan would be to buy the company for what is essentially less than the value of KLOS alone, sell off the majority of the stations, and — even if many of station sales were sold at fire-sale prices — be left with about $2 billion to run the remaining ten stations I’d keep. Those ten stations would have no debt, meaning I could put the remaining money into talent, programming and promotion. With no debt and a huge cash stash to be used for running the remaining group, my ten station network easily be the most profitable, dynamic stations in the country.
Why isn’t someone actually doing this? Or the related obvious question: why isn’t anyone forcing Cumulus to do this themselves? What am I missing? Shouldn’t a company that owes debt have to start selling stations to pay off said debt? And will someone please explain this to the FCC and Congress, both of which allowed this radio ownership model of “too big to succeed” to happen in the first place? The best way to make radio profitable again it to make it smaller, as consolidation has brought down the entire industry.
A cap of ten stations total nationwide would go a long way to bringing back radio to the level of success it deserves. If new FCC chairman Ajit Pai really wants to help radio — as he claims he does — this should be the first move.
It was KNX (1070 AM) that won the overall morning matings — meaning all listeners aged 6 and over — but it was Alt 98.7 FM’s The Woody Show that won the coveted and lucrative demographic of listeners 18-34.
If you haven’t heard the show yet, you should check it out. Yes, parts of it may be considered “light crude,” if there is such a phrase. Such as when they play recordings of someone, um, passing gas with listeners calling in to guess which of the morning crew passed it. But over all it is a remarkably creative, clever, funny and witty show that is well worth listening.
Stiffs and Hits
A funny thing happened as I was listening to recordings of The Real Don Steele on KHJ circa-1967 or so via ReelRadio.Com. Lots of stiffs. Thought not necessarily bad music. Let me explain.
I was told once by Bill Drake, who along with Gene Chanault consulted KHJ in the 1960s and KRTH (101.1 FM) in the 1990s, that KRTH could easily play tapes of KHJ and few would notice … it was the same music.
Yet as I listened to recordings of Steele, I found just the opposite. Many of the songs were not hits, even when new. KHJ, and most hit stations of the era, tried to break as many new songs and new bands as they could. It was a bragging right as well as a survival technique, as many songs were shorter than three minutes and would quickly burn out if new music didn’t come in soon to replace it.
So unlike today, when a song can stay on station playlists for years, in the 1960s and ‘70s the entire playlist could be totally different in a matter of weeks. Thus, even “hitbounds” didn’t necessarily become hits at all. And old recordings such as on ReelRadio offer music that you truly may have never heard in decades, if you ever heard it at all. I’m not saying this is good or bad, but it is a difference between radio then and now.