Trustee believes Interep has value


Bankruptcy trustee Kenneth Silverman has been busy, filing with the court to keep operating Interep on an interim basis. He’s come up with a budget and told the court that he should recover more for the creditors if he keeps the rep firm operating and has hopes for a quick sale. Stay tuned, things could move fast.

Silverman has called legal representatives of Interep’s creditors to a meeting December 2nd. But he may well have wrapped up a sale of the company long before that.

In a Monday filing with the bankruptcy court, Silverman said he has already negotiated a transaction which will produce more than what the debtor-in-possession lenders are owed for the $25 million they loaned Interep last spring to keep the company operating under Chapter 11. “A party to those negotiations has demonstrated an ability to consummate the transaction before the conclusion of business on October 31, 2008,” the filing said.

It is pretty clear that the potential buyer is not the team of bondholders, Oaktree Capital and Silver Point Capital, who are also the debtor-in-possession lenders. Is it Katz Media Group? Or is it someone else who sees the radio rep business as viable? In any case, the would-be buyer is certainly going to have to have Interep’s two biggest clients, CBS Radio and Entercom, onboard to make this work.

Reporting to the court on Interep’s current financial status, Silverman said there was $2.1 million in cash on hand once all checks outstanding had cleared. $7.8 million is expected to come in this week, although that includes $6 million in political ad buys that must be paid out to stations immediately. In all, Interep expects to pay out $9.15 million this week, including $1.5 million for payroll, leaving an estimated $768,000 in the bank at the end of this week. That’s week one for Silverman’s oversight of Interep. We understand that he is keeping the company open on a week-to-week basis, but to give himself some breathing room the trustee has asked the court for authority to operate the business through January 30, 2009.

Once the largest player in a more divided national radio representation marketplace, Interep is now a distant second-place to Clear Channel-owned Katz. Lee Westerfield at BMO Capital Markets, one of the very few analysts who follows CC Media Holdings, the new parent company of Clear Channel, told RBR/TVBR that as of about six months ago, the most recent data he has, Katz had about 70% of the national radio sales business to Interep’s 30%.

“What makes the equation more challenging to calculate is the unknown level of guarantees from Katz to its newer clients that begin to trail off in 2009 as current contracts expire,” Westerfield said. Of course, if Katz becomes the only major national rep firm in radio, it will no longer have to bid so aggressively for those client contracts.

RBR/TVBR observation: Now that all previous bets are off the table, things can move at light speed. The creditors no longer have much say over how this comes out, so the trustee can put together the best deal to be had in today’s horrible economic climate and everyone will take their licks and move on. Here’s hoping the outcome is good for radio.

RBR/TVBR note: For complete reference to the facts recommend you read RBR First Alert: Interep gets a one-week reprieve from Monday, 10/27/08 RBR report.