When this week began, bankruptcy trustee Kenneth Silverman was in final negotiations with a single party to buy Interep and he’d told the federal bankruptcy court that a contract might by signed by today. But by the time Silverman got to the courtroom yesterday for the grant of his motion to keep the radio and TV rep firm operating, he’d apparently been approached by several more potential buyers. Hang on. It may be a while before we know the final disposition of Interep.
Veteran bankruptcy attorney Wanda Borges was in the courtroom and later discussed the case on a conference call hosed by Media Financial Management and its BCCA subsidiary. The station financial pros on the call were, of course, wanting to find out what is going to happen to Interep, whether their rep contracts are still binding and when they’ll get paid for spots that have run. The situation, she noted, is frustrating to creditors and puzzling to holders of those rep contracts.
Regardless of what the contract may say about termination rights, the bankruptcy proceeding has voided any contractual right to get out of the rep contract. If the broadcaster doesn’t want to be repped by whomever agrees to acquire their contract they can hire an attorney and ask that the sale of their contract be rejected. But for now all they can do is wait to see what happens.
And it now looks like nothing is going to happen today. When Silverman filed his motion with the bankruptcy court to keep operating Interep on an interim basis, he indicated that he was in negotiations with a single party on a transaction that could be concluded by today (10/31). But yesterday it was clear that there is now more than one bidder.
Borges said she asked Ron Friedman, an attorney working with Silverman, why the trustee needs 90 days, as granted by the court, to get a deal done. “Wanda, people and companies have been coming out of the woodwork,” she quoted him as saying. Asked just how many – “I could see him counting in his head” – he said “I’m in communication with five different entities.”
What’s not know is how many of those want all of Interep and all of its rep contracts and how many want only pieces of the business. Once Silverman strikes a deal, or multiple deals – and that may be just a matter of days from now – he will come back to the court to seek approval. The sale motion requires 20 days notice for anyone to come forward with a topper bid, although the court could shorten that period. Noting that the Thanksgiving holiday could complicate the timetable, Borges figures there still might be a closing before the end of 2008.
Silverman had praise for Interep CEO David Kennedy and his team in the court hearing. Borges said he told the judge that he found the core management “excellent, competent and willing to cooperate with the Chapter 7 trustee to do the wind-down.”
If your station is repped by Interep, you will no doubt be interested in this part of the order signed yesterday by US Bankruptcy Judge Robert Drain. The language in his order came after CBS Radio withdrew its filing seeking an accounting of the money it is due and Spanish Broadcasting System sought clarification on how its money is being handled.
“ORDERED, payments received and to be received by the Debtors from media buyers in connection with the sale of national radio and/or television broadcast advertising time on radio and/or television stations for which the Debtors act as the agent or representative of such radio and/or television stations shall be deposited into a separate account for the benefit of such radio and/or television stations (the “Funds"); and it is further
ORDERED, that the Funds, less commissions and expenses due the Debtors under the applicable representation agreement, shall be paid to radio and/or television stations entitled to such payments under the applicable representation agreement in the ordinary course of business in accordance with the terms of the representation agreements…”
Just how much will Interep still bring as it is sold? Friedman indicated that not only will the debtor-in-possession financing be paid off, but also the secured creditors – and there will still be something left for unsecured creditors. He didn’t specify, but Borges speculated that it could be in the range of 30-40 cents on the dollar. That could be a bit of good news for former Interep employees still due payments from their severance packages.
By the way, Commerce Bank has now unfrozen the debtor-in-possession (DIP) bank accounts, so if your station is holding a check that bounced, Borges says it should clear if you re-submit it. The DIP lenders have agreed to continue funding.
Also on the MFM/BCCA call, BIAfn Vice President Mark Fratrik noted that the Interep bankruptcy comes amid weakness in national spot advertising that has been plaguing the radio industry for some time now. National fell 6% in 2007, while local was down only 2%. Through the first half of this year, national dropped 11% and local 6%, according to RAB figures. “So obviously radio is feeling the impact of the economy, it’s feeling the impact of increased competition for listeners and advertisers,” he said. “Interep’s situation is a casualty of these industry trends within a slowing and receding overall economy – and no denying that fact,” Fratrik said.
Fratrik noted that Interep’s remaining clients include companies with important radio stations that advertisers still want to place spots on. And he said there are some in radio who want to see competition continue in the rep business. Fratrik sees the possibility that a new owner may see ways to make Interep more efficient and competitive. But he also suggested that some of radio groups may decide to take national representation in-house. We would note that the last major radio group with its own in-house national rep was CBS Radio, which also happens to be Interep’s largest client.
RBR/TVBR observation: If Clear Channel’s Katz Media Group was, indeed, the sole bidder at the beginning of this week, we’ll now find out just how badly it wants to buy out its only major rival in the radio rep business. And if it is not the only one willing to buy Interep, there’s also the hurdle of winning antitrust clearance. Meanwhile, the station clients wait. Some on the MFM/BCCA conference call yesterday wanted to know why they can’t exercise their contract termination provisions. Well, the bankruptcy law puts the kibosh on that.
RBR/TVBR note: So you can follow this mouse maze here is the list of events as they unfolded this week of October 27th, 2008. Have a comment on the Interep issue please post below:
10/27/08 RBR news Interep to Remain Open
10/28/08 7:30 RBR news Alert: Interep Stays Open