Equity Media warns investors


As it faces an April 18th deadline to come to terms with its lenders, who have granted it forbearance for default (3/31/08 TVBR #63), Equity Media has issued a notice under Nasdaq rules that its latest audit contains a qualification about the company’s ability to continue as a “going concern.” The TV group owner’s stock has fallen this month from 3.02 to below 70 cents.

“The Company’s existing capital resources are not sufficient to fund its operations. If the Company is unable to obtain adequate additional sources of capital in the near term it will need to cease all or a portion of its operations, seek protection under U.S. bankruptcy laws and regulations, engage in a restructuring or undertake a combination of these and other actions. Additional sources of capital, if obtained, would likely come from sales by the Company of debt and/or equity and/or the sale of material assets of the Company. The Company is currently negotiating potential transactions that would supply it with capital necessary to meet its current requirements,” Equity Media said in the annual 10-K it filed with the SEC.

The company’s latest reworking of its credit agreements with Silver Point Finance and Well Fargo Foothill was only February 13th, and yet it had to go back to the lenders to get the forbearance agreement on March 20th. Equity said it had borrowed a bit over $50.5 million under the $53 million credit facility, but does not now have access to the remaining $2.5 million.

Even with the $53 million facility, Equity says it would not be able to cover the costs of operations for the next 12 months. “If the Company is unable to obtain additional funds when they are required or if the funds cannot be obtained on favorable terms, management may be required to liquidate available assets, restructure the Company or in the extreme event, cease operations,” the filing said.  

RBR/TVBR observation: It was barely over a year ago that Equity Media became a public company by merging with a “blank check” company created to find an up-and-coming business to invest in. Even as the tough economy took its stock price lower, along with other TV stocks, Equity appeared to be continuing to build its business. It owns a large group of full- and low-power TV stations, most of which are affiliated with Univision and TeleFutura. It also launched Retro Television Network (RTN), which has signed affiliate deals to be carried on DTV multicast channels by numerous stations owned by major groups. Just this week it announced a deal to be carried on three Citadel Communications stations in Iowa and Nebraska. But a growing company needs cash and that generally means ever-bigger credit lines. In the current tight credit market, it is going to be very difficult for Equity to find additional financing by April 18th.