Latest Chapter 11: NextMedia


A day after Citadel Broadcasting filed its Chapter 11 petition, NextMedia joined the parade. Monday’s filing was prompted by a recent raid on NextMedia’s cash by its senior lenders.

NextMedia owns 36 radio stations in seven medium and suburban markets and some 5,200 billboard faces in six markets.

According to its Chapter 11 filing in the US Bankruptcy Court for Delaware, NextMedia owed $162.3 million to its 1st lien lenders, headed by Wilmington Trust as agent, and $89.6 million to 2nd lien holders, headed by NexBank.

NextMedia had been negotiating with its lenders on a pre-packed reorganization plan and had come to terms with the 2nd lien holders, the company said. But on December 10th, “the First Lien Agent swept the vast majority of the Debtors’ cash, which precipitated the need to abandon the prepack and file for bankruptcy promptly,” the company said in a court filing.

Under terms of the proposed restructuring, the 1st lien debt and general unsecured claims are to be paid in full. To do that, the 2nd lien lead investors have agreed to make a $55 million equity investment, which would be added to $127.5 million in Chapter 11 exit financing and cash on hand. The 2nd lien debt would be converted to 95% equity in the reorganized company, with two-thirds of the equity ending up in the hands of the parties called the 2nd lien lead investors, which will be of a different class than the remainder and have a liquidation preference over the other common shares.

In addition, the 2nd lien lead investors have agreed to backstop the $127.5 million in exit financing, should NextMedia not be able to find financing on desirable terms elsewhere, and the 2nd lien lead investors will provide up to $20 million in debtor-in-possession financing.

NextMedia’s filing described the decline of both the radio and outdoor advertising markets in the recent recession. The company said it is significantly outperforming the overall radio industry, with revenues down only 12.5% year-to-date, versus a 21% decline for the US radio industry. While revenues for the overall US outdoor advertising industry were down an estimated 18% through the third quarter, NextMedia noted that it was down only 17%.

In announcing the Chapter 11 filing, NextMedia said the reorganization process will have no impact on day-to-day operations of NextMedia’s business and will not result in any changes to senior management or any reduction to employee headcount. NextMedia said it is on track to generate over $23 million in EBITDA in 2009 and has sufficient funds to pay all of its vendors and employees.  Following the reorganization, the company expects to have total debt of approximately $128 million, representing a debt-to-EBITDA ratio of approximately 5.5x.

“As a result of this reorganization, we will bolster our financial position considerably, enhancing our ability to invest in our operations and execute our strategy,” said Steve Dinetz, President and CEO.  “Over the past 18 months we have taken steps to reduce costs and increase efficiencies across our operations, while continuing to invest in our assets, content, sales, marketing and customer service. Today’s action puts us well ahead of the process in preparing NextMedia to fully capitalize on the recovery in the nation’s out-of-home advertising markets,” he added.