What Will Emmis Part Ways With To Meet $80M Obligation?


LAS VEGAS — Emmis Communications Chairman/CEO Jeff Smulyan spent much of Monday morning promoting new advances with the NextRadio app (it’s getting a streaming audio version that finally brings it to iOS-powered devices), and an update on a product from Emmis’s wholly owned TagStation.

Back at Emmis’ Indianapolis headquarters, company executives filed a Form 8-K with the Securities and Exchange Commission that may further what Wells Fargo Securities Managing Director Marci Ryvicker calls Smulyan’s “diminshed role” as a radio industry leader, in a RBR+TVBR Spring 2017 special report distributed here at the 2017 NAB Show.

That’s because Emmis needs to sell more assets, and strike a deal — or deals — totaling at least $80 million in value no later than Jan. 18, 2018.

The Form 8-K filed late Monday (4/24) by Emmis indicates that, on April 18, Emmis entered into a Fourth Amendment of its 2014 Credit Agreement. On June 14, 2014, with JPMorgan Chase as the administrative agent and Fifth Third Bank as the syndication agent, Emmis entered into a credit agreement allowing it to largely fund the second closing of its purchase of WLIB-AM 1190 and WBLS-FM 107. 5 in New York; some $76 million of the proceeds of the agreement went to fund the purchase.

The 2014 Credit Agreement includes a senior secured term loan facility of $185 million and a senior secured revolving credit facility of $20 million. Pursuant to the 2014 Credit Agreement, Emmis immediately borrowed $185 million of the senior secured term loans; $109 million was disbursed to Emmis.

This effectively grew Emmis’ long-term debt to $257.4 million as of Nov. 30, 2014, from $114.9 million as of Feb. 28, 2014.

Now, under the Fourth Amendment codified with its lenders, Emmis eliminated the maximum total leverage ratio through May 31, 2018 and replaced it with a minimum consolidated EBITDA covenant of $20 million.

On June 1, 2018, it reverts to a total leverage ratio of 4-1 for the quarters ended Aug. 31, 2018.

Thereafter, the Interest Coverage Ratio is reduced, from 2-1 to 1.6-1.

Additionally, The Bank of New York Mellon will serve as the successor Administrative Agent, pursuant to the third amendment reached in August 2016 for the 2014 Credit Agreement.

This gives Emmis more wiggle room in meeting its repayment obligations. But, there’s the covenant that the company must shed even more assets — and have deals struck within the next nine months. Closing cannot occur later than July 18, 2018.

Meanwhile, Emmis increased the Applicable Margin throughout the remainder of the term of the Credit Agreement to 6% for ABR Loans and 7% for Eurodollar Loans, while increasing the unused commitment fee on the revolving credit facility to 75 basis points.

Emmis also accelerated the maturity of its Term Loans to April 18, 2019, and the maturity of its Revolving Loans to August 31, 2018.

In addition to tightening or eliminating baskets and other credit enhancements for lenders, the Fourth Amendment contains ratcheting fees and premiums if the existing credit facility is not refinanced by July 18, 2018, Emmis notes.

To execute this Fourth Amendment, Emmis is required to pay a fee of 1% of the Term Loan and Revolving Commitment of each Lender that consented to the Fourth Amendment.

What’s the total bill for Emmis? The fee totaled $1.5 million and was recorded as additional original issue discount. It is being amortized as interest expense over the remaining life of the 2014 Credit Agreement.


On Feb. 28, 2017, Emmis issued an announcement and filed an 8-K with the SEC saying it had closed on the sale of four monthly magazines serving Atlanta, Cincinnati, Los Angeles, and Orange County, Calif., to Detroit-based Hour Media Group.

The once-venerable publications were sold to Hour for a total price of $6.5 million.

This makes the sale of the publications a bit of a fire sale. In October 2016, Emmis sold venerable glossy publication Texas Monthly to Genesis Park LP, an affiliate of a private equity firm led by Paul Hobby for $25 million.

Along with these deals came two Terre Haute, Ind., divestments.

WTHI-FM 99.9 FM and the intellectual property of WWVR-FM 105.5 The River were dealt to Duke Wright’s Midwest Communications for $4.3 million.

In the second deal, Emmis sold the facilities (minus the intellectual property) of WWVR-FM, in addition to WFNB-FM 92.7 and WFNF-AM 1130 (plus its associated FM translator) to DLC Media for $900,000.

With those deals totaling $36.7 million, Emmis will need to make a major divestment — and perhaps a “powerful” one.

With a diminished presence in Southern California and CHR/Rhythmic KPWR-FM 105.9 “Power 106” in Los Angeles its lone property in a highly competitive market, Emmis may be readying a retreat from its battle with iHeart. With asset purchase agreements totaling at least $80 million now on the clock for Emmis, there’s some chatter that Power 106 would be an obvious choice, given its 30-year heritage in Southern California and continued brand value.

At the same time, WLIB-AM 1190 has been on the market since late August, and has yet to find a buyer. With WLIB one of the two stations that triggered the 2014 Credit Agreement, one now wonders if Emmis will pair WLIB with WBLS and sell them as a pair, effectively turning back the clock and erasing the 2014 deal that brought the stations targeting African-American listeners to Emmis as a way to fully protect its CHR/Rhythmic stalwart in New York — WQHT-FM 97.1.

Meanwhile, Emmis has a 50.1% interest in an Austin cluster comprised of KLBJ-AM, five FMs and two FM translators; Sinclair Telecable has the remaining interest.

Additionally, Emmis owns and operates four FMs in St. Louis.

Given the $80 million needed by Jan. 18, 2018, the Austin and St. Louis ownership assets may also be in play.

What’s certain is that Emmis will likely not divest its Indianapolis holdings; it has stated that it seeks to retain Indianapolis Monthly.

While the speculation will continue for weeks to come, there’s one certainty regarding Emmis: It’s a seller, not a buyer. With media brokers in suites at the Encore through tomorrow (4/26), perhaps Emmis has emerged as a surprise radio industry player in a post-spectrum auction world focused primarily on TV’s deals-to-be.