Double digit drop for Cumulus Media Partners


Q4 revenues were down 15.5% for Cumulus Media Partners, the large market radio group managed by Cumulus Media, but owned in partnership with some private equity investors. Cumulus Media Partners is in the midst of pitching debt holders to swap their senior subordinated notes for a package that includes a 40% equity stake in the company.

Cumulus Media itself reports its Q4 results today and CEO Lew Dickey will conduct a conference call with analysts.

For Cumulus Media Partners, which owns 32 stations in nine markets, Q4 revenues declined 15.5% to $48.5 million. Station operating income (SOI) dropped 25.5% to $20.1 million. That was blamed on the weak demand for advertising, partially offset by a general decrease in operating costs across the station platform, “coupled with a format change in the Atlanta market.”

Full year 2008 revenues were down 9% to $203.4 million. SOI declined 16.6% to $83.4 million.

Cumulus Media Partners was created with a 2005 deal to acquire the former Susquehanna Radio group for $1.2 billion, so the company is loaded with debt. As of December 31st, the company said it had $657.5 million in borrowing outstanding on it senior term-loan facility and $96.7 million on its revolver. Its senior debt facilities carry a covenant limiting the total debt-to-EBITDA leverage to 10.5 to 1. As of the end of 2008, it was 10.43 to 1. But that covenant limit drops to 10.25 to 1 as of March 31, unless Cumulus Media Partners gets a waiver from its senior lenders.

The company warns that in case of a default, the lenders could declare the entire amount outstanding under the senior loans due and immediately payable. Additionally, Cumulus Media Partners says there is a “high probability” that after making payments due on its senior facilities there won’t be enough cash left in the coffers to make the interest payment due on its $187.6 million of 9.875% senior subordinated notes due 2014. That explains why those noteholders are being asked to agree to exchange them for up to $15 million of new subordinated notes due 2014, up to $35 million in new preferred stock and warrants which, if exercised, would represent up to 40% of the total stock of the company.

RBR/TVBR observation: The note holders may not be thrilled with becoming equity partners, but the alternative scenario is worse. Cumulus Media Partners warns that it may not have enough cash after paying interest to its secured lenders to also pay the interest that would be due the noteholders in May – and that a default could lead it to explore alternatives including a bankruptcy filing.