iHeartMedia planning to sell in Virginia/Carolina?

[freqdev]

As I've said throughout this thread, there's nothing they've done at any station in that region that is different from what they've done in Hartford, Chattanooga, or St. Louis. It happens all the time when you work for them.

If they sell the entire region, it wouldn't do a thing to make their $20 billion debt more manageable. That can only be solved by a refinance, which is what they're in the middle of doing, and why I say any market sales would interfere with the refinance. If they complete the refinance (and that is going to take a while), the lender will get 51%. They're expecting to get 51% of the company as it exists now, with the current revenue streams. Any changes in the company before the deal is done will affect the value of the deal. Understand?

BTW companies that have tried to make fire sale deals with iHeart for their stations get quick turn downs. That's partly why the Aloha Trust hasn't sold many stations. They're priced higher than their value, given the quality of their facilities.

Having no employees is easy for a company like iHeart to deal with, since they have VT services available in house. Things like Premium Choice and syndicated shows they already own. Saga, SummitMedia, and any other potential buyers don't have access to that.

point taken sadly you sound like bob pitman's pitchman

 

[TheBigA]

point taken sadly you sound like bob pitman's pitchman

So what? If there's anything I said that's wrong, let me know.

Look, if they do this deal where the lender gets 51% equity in the company, and that lender says to start selling assets, this may be where they begin. But they have lots of assets they can sell if they just need to make next week's payroll without actually selling stations. Such as sell off more markets of their Outdoor division. That's what they did the last time. Or maybe there's other real estate they can sell. Pittman's pitchman wouldn't tell you that.

 

[davideduardo]

point taken sadly you sound like bob pitman's pitchman

Nope. He sounds like someone who understands the mechanics of avoiding bankruptcy with an equity trade. Equity is not enhanced by converting cash flowing assets into just cash.

 

[miketheradioguy]

If they sell the entire region, it wouldn't do a thing to make their $20 billion debt more manageable.

I'm not expecting iHeartMedia to sell their entire Virginia/Carolina region, because there are some good markets in the region iHeartMedia would consider worth keeping.

 

[TheBigA]

I'm not expecting iHeartMedia to sell their entire Virginia/Carolina region, because there are some good markets in the region iHeartMedia would consider worth keeping.

My point is I'm not expecting them to sell ANY stations, and as I've stated, there are lots of reasons why they won't.

 

[TheBigA]

Today Tom Taylor reports that if Saga is buying anything in the southeast, it will be from Alpha:

"Alpha’s Larry Wilson’s been looking to sell some markets to pay down debt from the $264 million Digity acquisition. Saga’s Ed Christian is sitting on more than $40 million left from the $66.6 million TV station exit-deal profit to reinvest (or face undesirable tax consequences). He and Larry are both crafty dealmakers."

 

[miketheradioguy]

Today Tom Taylor reports that if Saga is buying anything in the southeast, it will be from Alpha:

"Alpha’s Larry Wilson’s been looking to sell some markets to pay down debt from the $264 million Digity acquisition. Saga’s Ed Christian is sitting on more than $40 million left from the $66.6 million TV station exit-deal profit to reinvest (or face undesirable tax consequences). He and Larry are both crafty dealmakers."

Alpha Media seems to focus very well in small markets, which was why I thought of them being a potential buyer for some of iHeartMedia's smaller market stations that could be sold.

Which stations would Alpha Media be interested in selling to Saga if they want to pay down debt?

 

[Kent]

Well, Alpha doesn't own too many stations in the Southeast. So, it's not hard to figure out who could be on the block. Alpha also sold a couple of Richmond stations within the last year. It may want to sell the rest of the ones it has there.

I don't see Alpha being much of a buyer unless it swaps. The Digity purchase was a budget buster, and rumor is Alpha's paying an astronomical interest rate on the $264 million principal.

Digity, by the way, was GoodRadio about 10 years ago and attempted to buy a large number of Clear Channel spinoffs when the private equity guys bought it. That deal ended up in divorce court after the PE firm backing GoodRadio's acquisition got cold feet.

 

[miketheradioguy]

Well, Alpha doesn't own too many stations in the Southeast. So, it's not hard to figure out who could be on the block. Alpha also sold a couple of Richmond stations within the last year. It may want to sell the rest of the ones it has there.

I don't see Alpha being much of a buyer unless it swaps. The Digity purchase was a budget buster, and rumor is Alpha's paying an astronomical interest rate on the $264 million principal.

Digity, by the way, was GoodRadio about 10 years ago and attempted to buy a large number of Clear Channel spinoffs when the private equity guys bought it. That deal ended up in divorce court after the PE firm backing GoodRadio's acquisition got cold feet.

Who would be interested in Alpha's two remaining stations in Richmond, because I assume everyone in the market is maxed out. I wonder if SummitMedia is interested in acquiring Alpha Media's stations in other markets.

 

[Kent]

If anybody buys Alpha in Richmond, it's going to be somebody content with two stations. I don't think Alpha sold two properties to an operator that pays per potential audience member with the intention of staying in the market.

As for Summit, I don't really have a lot of confidence in that company's chances of expansion, even with a new investor. Granted, that's just my opinion, and that and 75 cents will buy you a soda at QuikTrip through Labor Day. However, I don't see the expansion opportunity for Summit. Maybe it'll surprise me and pull off a big deal, but I'm not looking for it to happen.

 

[miketheradioguy]

If anybody buys Alpha in Richmond, it's going to be somebody content with two stations. I don't think Alpha sold two properties to an operator that pays per potential audience member with the intention of staying in the market.

As for Summit, I don't really have a lot of confidence in that company's chances of expansion, even with a new investor. Granted, that's just my opinion, and that and 75 cents will buy you a soda at QuikTrip through Labor Day. However, I don't see the expansion opportunity for Summit. Maybe it'll surprise me and pull off a big deal, but I'm not looking for it to happen.

SummitMedia may be interested in acquiring some stations from Cumulus.

 

[TheBigA]

SummitMedia may be interested in acquiring some stations from Cumulus.

The problem with Cumulus is the same as with iHeart. Any station sale will be at a loss, based on the purchase price. The money from the sale won't make a dent in the debt. And any sale means the company has lost value for the holders of the debt. They make more money selling tower property in major markets like LA and DC.

 

[davideduardo]

SummitMedia may be interested in acquiring some stations from Cumulus.

Summit just did the equivalent of a refinancing, where the former lead investment banker was replaced by a new major investor. They are not going to expand when they just had to do a "remake" of their base backing.

 

[miketheradioguy]

The problem with Cumulus is the same as with iHeart. Any station sale will be at a loss, based on the purchase price. The money from the sale won't make a dent in the debt. And any sale means the company has lost value for the holders of the debt. They make more money selling tower property in major markets like LA and DC.

It seems that there must be a direct correlation between Cumulus and iHeartMedia's financial problems. I wonder how selling tower properties will help reduce Cumulus' debt, because I know iHeartMedia, Entercom, Townsquare, and others have also sold non-core assets.

 

[Kent]

In terms of Cumulus, it historically made deals with equity rather than cash. That enabled it to expand quickly and without a lot of cash debt. The problem, however, was that the Dickeys swapped their equity away over time, and the Susquehanna and Citadel deals were enough to reduce their equity to minority status. The private equity firms that financed the various deals Cumulus made eventually wanted their money back. In a sense, Cumulus is better off than iHeart because the owners essentially owe most of that huge debt to themselves. Right now, they've lost value because their stations are worth less than what they paid for them. If they sell, they lose money.

I'm less familiar with iHeart, but, as I understand it, iHeart's current owners borrowed money from other private equity firms in addition to using their own money. They want to solve their debt problem by swapping equity for that debt. Selling stations at a loss doesn't help them achieve that goal.

 

[TheBigA]

I wonder how selling tower properties will help reduce Cumulus' debt, because I know iHeartMedia, Entercom, Townsquare, and others have also sold non-core assets.

Good question, and there is no guarantee Cumulus will actually apply the tower property money towards the debt. However, given what their CFO has said, and that lessening the debt is a top priority, one would think they will.

Cumulus already sold the Los Angeles 10 acre property were the KABC tower and studio was located for about $80 million. In fact the antenna was moved a month or so ago. The 75 acre WMAL tower property in Bethesda has a buyer set to pay about $125 million. So that's a big chunk of change, and will make a dent in the $2 billion debt. Far bigger than selling a small cluster of radio stations. Two years ago iHeart sold all of its tower properties as a group for $400 million.

 

[miketheradioguy]

In terms of Cumulus, it historically made deals with equity rather than cash. That enabled it to expand quickly and without a lot of cash debt. The problem, however, was that the Dickeys swapped their equity away over time, and the Susquehanna and Citadel deals were enough to reduce their equity to minority status. The private equity firms that financed the various deals Cumulus made eventually wanted their money back. In a sense, Cumulus is better off than iHeart because the owners essentially owe most of that huge debt to themselves. Right now, they've lost value because their stations are worth less than what they paid for them. If they sell, they lose money.

I'm less familiar with iHeart, but, as I understand it, iHeart's current owners borrowed money from other private equity firms in addition to using their own money. They want to solve their debt problem by swapping equity for that debt. Selling stations at a loss doesn't help them achieve that goal.

From what I understand, Entercom will have $1.9 billion in debt post-merger which is a little less than what Cumulus has. My main concern is about how and if Entercom would be able to trade their spinoffs to Cumulus, because they're a good swap partner in some of the markets where Entercom needs to spin stations.

 

[TheBigA]

From what I understand, Entercom will have $1.9 billion in debt post-merger which is a little less than what Cumulus has. My main concern is about how and if Entercom would be able to trade their spinoffs to Cumulus, because they're a good swap partner in some of the markets where Entercom needs to spin stations.

The only markets where this is being discussed are LA & Houston.

In other Cumulus news, Tom Taylor today announced they used the proceeds from the sale of their tower land in LA to pay down $81 million of their debt. Their total debt is now listed at $1.7 billion.

 

[miketheradioguy]

The only markets where this is being discussed are LA & Houston.

In other Cumulus news, Tom Taylor today announced they used the proceeds from the sale of their tower land in LA to pay down $81 million of their debt. Their total debt is now listed at $1.7 billion.

I'm glad that Cumulus is making progress reducing their debt.

Another market that comes to mind regarding CBS Radio spinoffs is San Francisco. Entercom needs to spin 4 FMs and Cumulus owns 4 AMs and 3 FMs in the market. So I thought that Entercom could swap two FM stations for two AM stations with Cumulus, and in turn sell 1 AM and the other 2 FMs to someone else.

 

[TheBigA]

So I thought that Entercom could swap two FM stations for two AM stations with Cumulus, and in turn sell 1 AM and the other 2 FMs to someone else.

FM stations are not equal to AM stations, so it would not be a fair trade.