No acceptable outside bids came in, so the senior lenders will be the new owners of Young Broadcasting. CEO Vincent Young told employees that the debt-for-equity swap approved Wednesday by a federal bankruptcy judge will produce “an improved capital structure that will make us more competitive in the current economic environment.”
The price tag is a far cry from the $820 million that Young paid for its largest station, KRON-TV San Francisco, in 2000 – the highest price ever paid for a single US television station. The credit bid by the secured creditors has a face value of $220 million, including $20 million to cover expenses associated with the bankruptcy proceeding. That’s not just for KRON, but for the entire Young group in 10 markets.
Kevin Shea, managing director of Loughlin Meghji + Company, the bankruptcy and restructuring advisory firm which advised the lender group, explained to RBR/TVBR how the bidding went down and why the auction scheduled for Tuesday was cancelled. Three outside bids were received, in addition to the credit bid by the lender group. Two of those bids happened to be the same – $120 million for all of Young’s assets. A third bid was for $215 million, but Shea described it as “more an indication of interest.” That bidder did not submit the required 10% deposit and requested 2-3 weeks of additional time to conduct due diligence.
After weekend discussions of the bids, Young’s representatives went back to the two $120 million bidders and asked if they would be willing to match or exceed the $220 million bid by the lenders. Both declined. At that point Young made the decision that the scheduled Tuesday auction was unnecessary and requested that it be cancelled.
A final sale hearing is now scheduled for next Thursday (7/23), after which Young will file with the FCC to transfer its licenses to the lender group. The agent bank for the lender group is Wachovia, but otherwise no details of its composition have yet been made public.
Shea told RBR/TVBR that he, personally, has been working on radio and TV bankruptcy/restructuring cases for about a year now. And noting the recent ad spending forecast from Magna, he’s not expecting Young to be his last.
“We’re pretty bullish about the television business and the radio business,” Shea said, at least for long term value. But first, he noted, the industry is going to have a couple more tough years.
RBR/TVBR observation: Don’t assume that the term “senior lenders” means only banks. Vulture investment funds long ago bought up some of that troubled debt. But we’re told that there is no single majority owner of the debt, so it will be interesting to see who all the owners are when the transfer is filed with the FCC. For now, that’s not being disclosed.