As planned, Cumulus Media has filed a Chapter 11 bankruptcy reorganization proceeding for two radio stations in Kansas City and two in Houston. The financial restructuring is a holdover from the pre-merger Cumulus Media Partners (CMP) and nothing is really changing at the four stations.
“We will continue to operate the stations,” Cumulus Media CEO Lew Dickey told RBR-TVBR. As previously reported, the deal to do the pre-packaged bankruptcy filing was cut back in February, before CMP merged into Cumulus Media, so the entity known as CMP KC LLC was never consolidated into Cumulus Media’s financial reporting. The Chapter 11 plan will reduce $95 million of debt to $20 million via a new loan and the senior lenders will become the new equity owners.
Just before the filing in the US Bankruptcy Court for Delaware CMP KC LLC was renamed AR Broadcasting. It has retained Patrick Communications as a consultant. A hearing before Judge Kevin Gross was set for Friday (11/18) for approval of “first day” orders which will permit AR Broadcasting to continue normal operations of KCHZ-FM & KMJK-FM Kansas City and KFNC-FM and KHJK-FM Houston.
When AR Broadcasting emerges from Chapter 11 in early 2012 its single majority shareholder will be Oxford Radio LLC, which will hold 76% of the equity in the new company. It is believed that most of the senior debt of AR Broadcasting is held by vulture funds which bought it from the original lenders. NexBank SSB, which succeeded Deutsche Bank as administrative agent for the original loan, is serving as agent for the new $20 million term loan as well.
The reorganization plan is pretty simple, since all secured and unsecured creditors except for the senior lenders and the former equity holders are to be paid in full – and the plan has already been approved by the senior lenders. At this point it really comes down to moving the paperwork through the court and the FCC.
RBR-TVBR observation: The vulture funds didn’t buy the debt of CMP KC LLC for pennies on the dollar because they wanted to get into the business of owning radio stations. Look for the new owners to seek a sale as soon as possible once they have clear title to them when the company emerges from Chapter 11. They won’t have to look far for the most likely buyer, which is Cumulus Media (unless someone else really wants them badly enough to outbid the company already operating them).