Just in time for Halloween, a “zombie” has surfaced in Washington. And, the Commission is comfortable enough with this creature living on an island off the coast of Los Angeles that it’s treating it unlike Godzilla.
That’s because the FCC has given its approval to the first-ever transaction involving a channel-sharing agreement, a so-called “zombie” station resulting from the Commission’s incentive auction, before the channel-sharing has even commenced.
Quietly and with no comment, the Commission on Friday (10/20) gave its approval to an application filed Sept. 11 that sees Southern California License LLC selling the channel-sharing agreement for KAZA-TV, licensed to the island municipality of Avalon, Calif., to TV-49 Inc. for $9 million.
KAZA is the Azteca América station serving the Los Angeles DMA, and this transaction comes following the pocketing of $91,116,442 by Southern California License LLC for relinquishing the spectrum for the former KAZA-54 in “Auction 1000.”
Southern California Licensee LLC is led by President Dennis J. Davis, whose address on file with the FCC is for a 9.5-acre, 3,861-square foot mansion on Piuma Road in Malibu—high above the Pacific Ocean with views of Malibu Pier—that last sold for $2.55 million in 2013.
Davis’ phone number on record with the FCC, however, doesn’t ring to this palatial mansion with priceless views that on a clear day include Avalon and Catalina Island. Instead, it rings to the offices of KMPH-26 in Fresno, owned by Sinclair Broadcast Group.
Sinclair is not involved with the licensee for KAZA nor is tied in any way to the CSA — Davis’ involvement with KMPH is solely the result of that station’s former owner, Pappas Telecasting Companies.
That’s the operation that in May 2008 filed for Chapter 11 bankruptcy protection and given until February 2009 to sell its wholly owned stations to new owners. Among its properties were two large AM radio stations: KTRB-AM 860, now licensed to San Francisco; and KMPH-AM 840 in Fresno.
Not included in the divestments nor impacted by the May 2008 Chapter 7 filing by Henry J. Pappas is KAZA. That’s because the station is 20% owned by TV Azteca, the maximum amount of foreign ownership allowed by the FCC until recent changes under Chairman Ajit Pai. Thanks to this investment, Pappas is not fully out of the broadcast media industry.
As previously reported by RBR+TVBR, the $9 million sale of KAZA’s CSA to TV-49 is being done by Southern California License LLC and Venture Technologies Group LLC. The two entities forged a post-Spectrum Auction CSA that allows KAZA to continue serving the L.A. DMA by using VTG’s 6 MHz channel licensed to KHTV-CD, a Class A station in Los Angeles at Channel 27.
This CSA went into effect on Aug. 25. But, a trio of Wiley Rein LLP attorneys noted something interesting about the Commission’s OK of this CSA trade: Although Southern California License obtained a CP for KAZA-TV to channel-share with KHTV-CD, the stations have not yet implemented sharing.
“Thus, it appears that the Commission has adopted a policy permitting the sale of a winning relinquishment bidder’s license before the station has begun to channel share—at least where the station has obtained a construction permit authorizing it to channel share,” attorneys Ari Meltzer, John Burgett and Jessica Rosenthal noted in a Wiley on Media blog post Friday that first shared news of the FCC’s OK.
Speaking to RBR+TVBR, Meltzer noted that Commission approval of the CSA sale to TV-49, an entity tied to Norman Shapiro’s Weigel Broadcasting Co., provides more clarity to companies looking to mimic what Davis, TV Azteca and the remnants of Pappas just pulled off.
“It’s a good thing for station owners who have been looking to sell stations that sold in the auction and were looking for guidance on how to proceed,” Meltzer said.
In particular, Meltzer said the first attempt at a CSA transaction created uncertainty among media brokers, communications law attorneys, and broadcast media owners.
On May 1, a potentially noteworthy L.A.-market “zombie station” transaction only made possible by the now-concluded FCC Spectrum Auction was struck. The arrangement would have allowed The Meruelo Group to pay $10 million for a channel-sharing agreement that Bob Behar’s Hero Licenseco had reached with Meruelo upon shedding the spectrum of KBEH-63 in Oxnard, Calif., for a whopping $146.6 million.
But, Hero backed out of the deal, which prompted an FCC Public Notice on May 8 that sought comment on the spin of channel-sharing agreements.
Hero’s decision to kill the deal made the Public Notice moot, and thus far there has been no sign of a reprise from the FCC regarding a new Public Notice on the trading of CSAs.
Speaking of the KAZA CSA approval, Meltzer said, “This will streamline the ability of station owners to structure their transactions.”
Meanwhile, Meruelo and Hero reworked their arrangement, and in mid-September filed a fresh Form 314 application with the Commission for Meruelo Media — owner of KWHY-22 in Los Angeles, in addition to KDAY-FM/KDEY-FM 93.5 and KPWR-FM 105.9 in L.A. — to acquire the CSA associated with KBEH. The facility fetched $146,627,980 in the FCC’s Spectrum Auction.
The specifics of the deal are unchanged from April 12, and the original asset purchase agreement codified between Meruelo and Hero has been resubmitted for Commission approval—with two minor amendments pertaining to office space and transmission facilities access.
Meanwhile, TV Azteca rival Univision has crafted its own CSA deal on the other side of the continent. In a Form 314 filing made with the FCC on June 15, Univision and William Binnie‘s WBIN Inc. agreed to a deal that hands Univision a channel-sharing agreement for the latter’s WBIN-35 in Derry, N.H. — part of the Boston DMA — for $16,764,133.70.
As stated in the asset purchase agreement, WBIN has a post-spectrum auction agreement with Univision to use a shared channel (a DT signal) tied to its UniMás affiliate in Boston, the Marlborough, Mass.-licensed WUTF-66. This is the result of WBIN Inc.’s relinquishment of WBIN-35’s spectrum in the FCC auction for $68,081,337.
For stations that still wish to channel share but haven’t acted yet, time is ticking: The Wiley Rein attorneys note that stations that have not yet filed an application to channel share must submit requests to the FCC no later than Tuesday (10/24), if they desire an extension of the Nov. 24, 2017 deadline to file their applications to channel share and/or the Jan. 23, 2018 deadline to discontinue operations on their pre-auction channels.
The FCC is expected to include the KAZA CSA sale approval in its Daily Digest on Wednesday (10/25), Meltzer notes.