You know that two Yucaipa funds and two Fortress funds which own the senior debt of Inner City Media won the bidding to acquire nearly all of the Inner City stations out of Chapter 11 bankruptcy. But who will actually own the new radio group, YMF Media LLC? The answer is complicated – very complicated.
First off, the Fortress funds will not have an attributable interest as far as the FCC is concerned. They are receiving warrants to acquire Class A and Class B membership units, but will not hold any actual units (which are like shares). Nonetheless, Fortress will have the right to nominate a replacement if either of the two independent managers resigns or is removed, so long as Fortress continues to hold warrants to acquire at least 30% of YMF’s combined Class A and Class B units.
The other three of the five managers are named by Ron Burkle’s Yucaipa Companies, although Burkle himself is not one of them. Yucaipa holds the right to fill those three seats so long as it holds at least 45% of YFM Media’s Class A and B units and/or warrants. It will be receiving Class A full voting units, Class B limited voting rights units and warrants as the new company takes possession of the Inner City stations.
Who are the managers? As expected, one of the Yucaipa managers is NBA great turned entrepreneur Earvin “Magic” Johnson Jr. (pictured). The others are Yucaipa execs Carlton Jenkins and Jeff Johnson, the latter the former Publisher of the Los Angeles Times.. The independent managers are Zemira Jones, former Radio One VP of Operations, and Ted Bartley, a TV group executive.
Magic Johnson is a part owner, but very indirectly. He owns 90% of Johnson Capital Management LLC, with Eric Holomon owning the other 10%. Johnson Capital owns minority stakes in two Yucaipa funds, which in turn manage the two Yucaipa funds which actually own YMF Media. Those two funds are owned 93.5% and 99.75% by non-voting insulated investors, with overwhelming voting control held by Ron Burkle.
YMF Media will also have Class C non-voting units. Those are reserved for an incentive plan which will be created by the board to issue units to key management and employees. When issued, those Class C units will represent 6% of total equity.
Burkle, via Yucaipa, will clearly have control, except that 80% approval is required for certain major moves, such as an IPO, extraordinary acquisition, large divestitures or a bankruptcy filing.
RBR-TVBR observation: This is certainly an impressive board – a celebrity/entrepreneur, money experts and media pros, including a bona fide radio executive.