Lou Mercatanti’s Nassau Broadcasting has filed its restructuring agreement with the FCC under which its lenders will swap their loans for equity. The senior lenders will, after closing, own all of WCRB-FM Boston and 85% of all other Nassau stations.
Pending approval by the FCC, the senior lenders – primarily Goldman Sachs, but also P.E. Capital, Spire Capital, RTV Ventures and others – will exchange most of the debt they hold for equity in the Nassau stations. Due to the FCC’s attribution rules, Nassau’s three stations on Cape Cod – WFQR-FM Harwich Port, MA, WFRQ-FM Mashpee, MA and WPXC-FM Hyannis, MA – will be spun off to Mid-Cape Broadcasting, whose members will be all of the lenders except Goldman Sachs. Also, the change of ownership will require the divestiture of WWHQ-FM and WNNH-FM in the Concord, NH market and WHXR-FM in the Portland, ME market, since the FCC’s local ownership rules have changed since Nassau built those clusters. The three stations will co into a divestiture trust managed by Mark O. Hubbard, who will be seeking to sell the stations.
WCRB will be owned by Boston Broadcasting I LLC. Its board will have three members, but the Goldman Sachs representative will have 12 votes, the P.E. Capital designee four votes and the other, jointly appointed by Goldman Sachs and P.E. Capital, a single vote.
All of the remaining stations – 51 of them in 27 markets – will operate under the umbrella of Nassau Broadcasting, reconstituted with the lenders as 85% equity owners.
As Mercatanti told employees back in April, nothing much will change in the way the company is run. He will continue to be CEO and the management team will remain. The settlement with the lenders cleans up a balance sheet that had become unbalanced as the advertising recession wiped out growth expectations from when Nassau had been on a buying spree.
As for the 15% that won’t be going to the senior lenders, Mercatanti and other senior managers will receiving Participation Units covering 5% of equity as incentives for them to operate the company and hopefully grow revenues and earnings as business improves. Current holders of Nassau’s preferred equity will receive a 10% equity stake in the station group, excluding Boston.
The reorganization documents detail how proceeds are to be split up if and when stations are sold – and even makes provisions for a possible IPO down the road. No doubt the parties involved think there have to be better days ahead.
RBR/TVBR observation: There was a time when Nassau was being primed for an IPO, but that was when the radio industry was enjoying brighter times. It is probably lucky that Nassau didn’t go public. It would have still run into the leverage problem and likely faced a messier restructuring in bankruptcy court.