Cumulus Gets OK For Debt For Equity Deal

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In a lengthy 8-K filing with the Securities & Exchange Commission submitted prior to the Opening Bell on Wall Street Wednesday, Cumulus Media confirmed that a cry for help to its bondholders was submitted for their approval on Tuesday (12/6), and won their okay.


What did Cumulus seek, and gain?

A debt for equity deal that is designed to reduce its towering debt.

Specifically, a Refinancing Support Agreement with supporting noteholders of approximately $349.7 million, or 57.3%, of the aggregate principal amount of its outstanding 7.75% Senior Notes due 2019 has been reached.

This means Cumulus’ bondholders have agreed to an exchange offer, and Cumulus notes in the filing that the agreement is the result of “arms’ length negotiations with the supporting noteholders.”

The private exchange offer is expressly designed to keep Cumulus as fiscally healthy as it can: The purpose of the exchange offer is to extend the maturity of its indebtedness. Cumulus believes this will “promote its long-term financial viability.”

As is standard with such arrangements, Cumulus will not retain any cash proceeds from the borrowings incurred in connection with the exchange offer, and will immediately use it to pare down debt, and operating costs and expenses.

How will the debt for equity deal work?

Upon completion of the exchange offer, former Cumulus noteholders will hold one-third of the company’s common equity, by way of Class A shares.

In return, Cumulus will have retired $610 million in outstanding unsecured indebtedness.

But, Cumulus will be taking on $305 million in new debt, represented by new revolving loans due 2020 under the company’s existing credit agreement.

When the exchange offer is concluded, Cumulus says the participation interests will automatically be deposited into a Delaware statutory trust created for the deal, the “Cumulus Pass Through Trust,” in exchange for an equal aggregate principal amount of new trust certificates due 2020, representing fractional undivided interests in the property of the trust.

Cumulus is currently saddled with some $2.4 billion in debt and, along with iHeartMedia are the two most visible — and two most financially troubled — radio broadcast companies in the U.S.

Investors immediately reacted positively to Cumulus’ arrangement with its bondholders, sending CMLS shares up nearly 20%, to $1.26, in mid-afternoon trading on Wednesday.


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Adam R Jacobson is a veteran radio industry journalist and advertising industry analyst with general, multicultural and Hispanic market expertise. From 1996 to 2006 he served as an editor at Radio & Records.