In a Tuesday conference call with analysts and investors, the management of Sinclair Broadcast Group described all of the financial issues facing the company. And the focus was on coming up with a plan to settle all of them not a piecemeal approach. The other possibility, as you’ve probably guessed, is a bankruptcy filing.
As described previously, Sinclair has been negotiating with holders of its convertible bonds. But in his conference call Tuesday, CFO David Amy said the company doesn’t see any point in coming to terms with those holders without also coming to terms with its senior lenders, so he’s looking for a holistic approach to resolving the financial issues facing the company.
Meanwhile, the most immediate deadline facing Sinclair is July 31st, when a loan comes due at Cunningham Broadcasting, whose six stations are LMA’d by Sinclair. Cunningham’s loan has already reached its maturity date, but an extension runs to the July 31st deadline. So, unless there’s a deal or another extension, Cunningham could be facing a bankruptcy filing. Under questioning by Wells Fargo analyst Marci Ryvicker, Amy confirmed that a bankruptcy filing by Cunningham could trigger a bankruptcy filing by Sinclair, since it could lose around $26 million in cash flow from the LMAs.
All voting interest in Cunningham is held by Carolyn Smith via a trust. She is the mother of Sinclair CEO David Smith and his three brothers, who are the largest shareholders of the publicly traded Sinclair. The privately held Cunningham’s stations are all in virtual duopolies with Sinclair stations in markets where Sinclair could not own two stations under FCC ownership rules. Because of that, Sinclair does not have the option of extending a financial rescue to Cunningham.
Amy told the analysts and investors that the dilemma is only now being disclosed because Cunningham had been in negotiations with its lenders and believed it had other options if the loan by three banks was not renewed. Those options, however, did not work out.