Audacy Stock today

[SirRoxalot]

EMF getting 102.5 might be a reason that the tower location - a stand-alone in the hills south of Buffalo - wasn't included in their property sell-off. Cumulus doesn't own most of their tower sites and wouldn't care as much about a tower lease or moving the tower and reducing power to focus on the metro. EMF could use that big stick and wide coverage to push signal out to a variety of translators on multiple HD channels.

Buddy likely is after 107.7. He's wanted it for a long time and it's more likely to fit his budget. It would extend his reach considerably and afford him the opportunity to add a second format - likely country to fit his cowboy hat. He worked on 107.7 when it was WNUC and is a fan of the format. The coverage area suggests that country is a better fit for the population it reaches.

Audacy can't cut its way to prosperity. What it really needs to do is increase revenue. Most cuts at this point will reduce revenue enough to create a net loss. That's pretty much what happened at both iHeart and Citadel/Cumulus. The bottom line is that they owe too much. If they can't convince the lenders that their best hope of getting their money back is to leave the current management in place, the Field family will be gone. One thing that came along with the "reverse Morris Trust" is a lot of talented managers in major markets that may look like a better option than David Field, and several of them have expressed dissatisfaction with his management. They know both the current investors and potential new investors and may have a shot at displacing the Field family despite their 18% of the holdings.

 

[tbolt909]

If 102.5 were to be divested to a non-commercial broadcaster, I wonder if Audacy would scrap WKSE's current format in order to allow it to move WTSS's intellectual property to 98.5?

I have no idea which of these two stations (WTSS vs. WKSE) is a better cash flow performer. The fact WTSS is the station being put on the block - and not WKSE - suggests to me WKSE must be the better cash flow performer of the two?

If WKSE is making more money, why would they scrap it to put STAR on that signal? Audacy is simply trying to raise cash in a panic move. They will never to be able to pay their debt. David Field is just hoping to delay his Day Of Reckoning...

 

[TheBigA]

The buying frenzy of the 90s helped dig this grave.

That's really not true at all. Things at Entercom were relatively OK until about a year ago. After two years of pandemic losses, the industry was hit with an advertising depression. This same advertising depression is hitting all ad-supported media, not just Audacy. The same thing happened in 2008. Entercom was not one of those companies that bought hundreds of stations at a time. This was very out of character for them. At the time, Entercom was one of the strongest and best managed radio companies in the country.

The other thing to consider is there's really no shame in going bankrupt. Lots of companies have done the Chap 11 thing and are still operating now. The reason Audacy doesn't want to lose it is its founders still have a lot of personal money in the company.

Companies tried to crush the competition by buying the competition. Greed, Hubris, and Stupidity are huge factors in this mess.

That's not at all what happened. CBS wanted to get out of radio business. They were going to do it one way or another. Entercom made the best offer. Would you have preferred CBS sell their stations to EMF or a religious broadcaster? It could have happened.

 

[TheBigA]

Audacy can't cut its way to prosperity. What it really needs to do is increase revenue.

We've had this conversation before: There are only two ways to increase revenue: More spots or raise their rates. Right now, listeners feel there are already too many spots. And advertisers have stopped buying radio because its too expensive. Raising prices in an advertising depression is not a good idea. So they can't increase revenue from their broadcast stations. That's why they've been trying to grow their digital business.

They know both the current investors and potential new investors and may have a shot at displacing the Field family despite their 18% of the holdings.

The alternatives to the Fields are not better. The alternatives are vulture capitalists who have no emotional attachment to the concept of local radio that Joe Field had. They will turn Audacy into a commercial version of EMF. Earlier in this thread, I suggested a white knight, along the lines of what John Malone did for Sirius. It appears there's no such thing for radio anymore.

 

[CTListener]

We've had this conversation before: There are only two ways to increase revenue: More spots or raise their rates. Right now, listeners feel there are already too many spots. And advertisers have stopped buying radio because its too expensive. Raising prices in an advertising depression is not a good idea.

You keep referring to what's happening to media advertising, especially radio, as an "advertising depression," as if it's cyclical. What evidence do you have that advertisers will ever come back to radio? They're not coming back to newspapers, and newspapers are shutting down. Isn't it possible that this is not part of a cycle but rather a sea change, and radio is headed for the rocks?

 

[TheBigA]

You keep referring to what's happening to media advertising, especially radio, as an "advertising depression," as if it's cyclical. What evidence do you have that advertisers will ever come back to radio?

There is none. In fact we've already seen major advertisers who once used radio in the 90s stop using radio and never return. One example is Levis. They were a regular advertiser for country radio in the 90s. Not any more. People still buy Levis. The company has the money to advertise, and they do. But not on radio. A major loss for radio is retail. At one time, every city had a local department store. Not any more. They were either bought up or run out of business by WalMart. So yes, I agree. There's no evidence advertisers will ever come back, because we already know a lot of them didn't come back after 2008.

 

[MarkW]

They will never to be able to pay their debt. David Field is just hoping to delay his Day Of Reckoning...

I fully agree that Audacy will never be able to fully repay its current debt load. They'll look to reduce that debt load at some point, either via a distressed debt exchange out-of-court or via a Chapter 11 plan of reorganization.

The way a distressed debt exchange works is like this:
Let's say you hold $1000 in junk bonds in a company that is in financial distress, and those bonds mature in 1 year. Let's say those $1000 in bonds are part of a $500 million total bond issue, all maturing in 1 year. The company has insufficient capacity to repay the full $500 million in principal at face value. Ideally, it would like to reduce that $500 million debt load to $300 million and extend maturity by three years.

In this purely illustrative example, the company would solicit existing bondholders to exchange every $1 in current bonds for, say $0.60 in new bonds with a longer maturity date, higher coupon rate (i.e. interest rate), and perhaps junior liens over company assets. The company would benefit by avoiding a major near-term liquidity outflow, it might be able to reduce its per annum interest expense burden, and those three additional years would give the company significant breathing room. For the bond holder, they might feel recovery in a Chapter 11 scenario would be comparatively weaker, they might prefer holding debt over equity, and they might have fairly high confidence that the company would be able to pay the higher interest coupon (usually a quarterly, semi-annual or annual payment) and redeem / refinance the new bonds at par value once they mature.

A governance document known as a Bond Indenture specifies how many bondholders (as a percentage of total existing bonds outstandings under that particular issue) would need to say "sign me up!" in order for the proposed exchange to have binding legal effect. Sometimes if a certain percentage consent threshold is reached, the entire class of bondholders is deemed to have accepted the exchange offer, meaning all of the existing bonds on record will be extinguished and replaced by the new bonds. Other times, some portion of the original bond issue will be allowed to remain in effect (representing the portion belonging to non-consenting bond holders). Often, if a certain percentage consent threshold fails to be reached, then no exchange will take place, even for consenting bondholders (such a scenario would be deemed a failed solicitation).

The mechanics all boil down to how the existing bond issue was originally documented from a terms & conditions vantage point. Exchange offers have set time limits in terms of determining the outcome. Sometimes, these time limits are extended one or more times.

The example I provided above is outside of the context of a Chapter 11 case. Chapter 11 has different rules which I won't delve into for the moment.

 

[TheBigA]

I fully agree that Audacy will never be able to fully repay its current debt load. They'll look to reduce that debt load at some point, either via a distressed debt exchange out-of-court or via a Chapter 11 plan of reorganization.

People wonder why they can't get traditional bank loans to buy radio stations. This is why. The history of radio companies and loans is not a good one, and the kinds of companies that would buy this debt are not traditional ones.

But lets go back to the original situation. CBS wanted to sell its radio stations. The original idea was to spin it off into its own company. To do that, CBS took out a $2 billion loan. Had that plan continued, CBS Radio (or whatever the spinoff company would have been called) would have been stuck with the same $2 billion debt that Entercom inherited. I have no reason to believe that CBS Radio, as a separate company, would have been any better in dealing with a $2 billion debt.

 

[tbolt909]

Who is the White Knight that wants to lose millions or billions to save Audacy? What's the point?

David Field made a major tactical error in getting involved in the CBS merge. That's Hubris...

 

[MarkW]

People wonder why they can't get traditional bank loans to buy radio stations. This is why. The history of radio companies and loans is not a good one, and the kinds of companies that would buy this debt are not traditional ones.

Bingo.

The original idea was to spin it off into its own company. To do that, CBS took out a $2 billion loan. Had that plan continued, CBS Radio (or whatever the spinoff company would have been called) would have been stuck with the same $2 billion debt that Entercom inherited. I have no reason to believe that CBS Radio, as a separate company, would have been any better in dealing with a $2 billion debt.

My theory is CBS's executive management and board of directors knew someone was already waiting in the wings to scoop up CBS Radio when that $2 billion in debt was issued. That $2 billion in debt was basically used as currency for Entercom's purchase, and the beneficiaries were CBS's shareholders (not to be confused with CBS Radio's shareholders).

That said, you are certainly correct that if Entercom had walked or the deal fell apart for some other unexpected reason, CBS Radio - as a standalone company - would have been saddled with all of that debt. CBS Corporation would have been in the clear, barring extraordinary circumstances.

 

[TheBigA]

My theory is CBS's executive management knew someone was already waiting in the wings to scoop up CBS Radio when that $2 billion in debt was issued. That $2 billion in debt was basically used as currency for Entercom's purchase, and the beneficiaries were CBS's shareholders (not to be confused with CBS Radio's shareholders).

Imagine being a lender, agreeing to a $2 billion loan to the CBS Corporation, a company valued at $15 billion at the time. Then have that loan transferred to Entercom, a much smaller company, without the assets of CBS Corporation.

 

[MarkW]

The $2 billion was a bond issue, with chunks purchased by many different parties. They knew (or should have known) the whole purpose of the transaction was to facilitate a marriage between CBS Radio and someone else.

As to other material non-public info to which the bond purchasers may have been privy (i.e. whether they were aware Entercom was going to be the buyer, whether they were aware David Field would be the CEO, etc.) - that's tough for me to say. I do believe CBS executives and its board at the time already knew Entercom would be the probable suitor.

Remember, the $2 billion was an obligation of CBS Radio (post spin-off), not CBS Corporation.

More info starting on page 5 of this thread:

https://www.radiodiscussions.com/threads/here-comes-audacy-atlas.760012/page-5

 

[RadioGuy1864]

That's not at all what happened. CBS wanted to get out of radio business. They were going to do it one way or another. Entercom made the best offer. Would you have preferred CBS sell their stations to EMF or a religious broadcaster? It could have happened.

The thing is EMF might just end up with quite a few ex-CBS stations. They seem to be one of the few active buyers now with lots of cash on hand to close the deals.

 

[TVEngineerArk]

EMF getting 102.5 might be a reason that the tower location - a stand-alone in the hills south of Buffalo - wasn't included in their property sell-off. Cumulus doesn't own most of their tower sites and wouldn't care as much about a tower lease or moving the tower and reducing power to focus on the metro. EMF could use that big stick and wide coverage to push signal out to a variety of translators on multiple HD channels.

Unless something has changed radically Audacy they don't own the Colden transmitter site where 102.5 is. Nexstar does with its ownership of WIVB-TV.

 

[davideduardo]

The buying frenzy of the 90s helped dig this grave.

As BigA said, that is not true at all. The financial crisis of a number of companies that expanded after the de-regulation change in ownership limits came much later, and was due, mostly, to:

1. The recession of 2008-09
2. The introduction of Smart Phones beginning in the same years.
3. The introduction of PPM measurement which reduced AQH persons and ratings of all stations by about 30%.
4. The huge growth of streaming associated with Smart Phones and the creation of lots of new audio services.

These things affected highly consolidated companies and those that we call "ma and pa" station in small markets.

The running joke back then was "Who owns my station today?".

It was no a joke to anyone in the business. You may have found it amusing, but to the rest of us it definitely was not.

Companies tried to crush the competition by buying the competition.

No, they tried to grow to get out of the status, during decades, of half of all stations losing money. This was exacerbated by the dreadful effects of Docket 80-90 at the start of the decade of the 90's where some markets ended up with more than twice the number of stations with no increase in revenue.

Greed, Hubris, and Stupidity are huge factors in this mess.

No, they are not. The motivation for growth was to become reasonably profitable again after the ruinous effect of Docket 80-90 and the need to be able to compete with the coming national services like Sirius and XM, which frightened terrestrial radio at that time.

 

[davideduardo]

The thing is EMF might just end up with quite a few ex-CBS stations. They seem to be one of the few active buyers now with lots of cash on hand to close the deals.

There is no indication that they are going to sell viable stations. Remember that the company, based on EBITDA, made well over $130 million last year. The stations are profitable on EBITDA basis, but when you add in debt service, depreciation and interest, you have a loss.

Eliminating cash flowing stations only makes things worse.

 

[davideduardo]

Imagine being a lender, agreeing to a $2 billion loan to the CBS Corporation, a company valued at $15 billion at the time. Then have that loan transferred to Entercom, a much smaller company, without the assets of CBS Corporation.

But the loan was not made to CBS Corporation; it was made specifically to the radio division and detailed as being attached to it should radio be separated from the larger parent.

 

[SirRoxalot]

Unless something has changed radically Audacy they don't own the Colden transmitter site where 102.5 is. Nexstar does with its ownership of WIVB-TV.

Well, that could be the reason that they're not selling it. I forgot that it was originally WBEN-FM and located on the TV property.

 

[MarkW]

As BigA said, that is not true at all. The financial crisis of a number of companies that expanded after the de-regulation change in ownership limits came much later, and was due, mostly, to:

1. The recession of 2008-09
2. The introduction of Smart Phones beginning in the same years.
3. The introduction of PPM measurement which reduced AQH persons and ratings of all stations by about 30%.
4. The huge growth of streaming associated with Smart Phones and the creation of lots of new audio services.

These things affected highly consolidated companies and those that we call "ma and pa" station in small markets.

I do think flawed business valuation & investment theses ought to be included on the above list.

Recall that one of the more controversial transactions from a valuation standpoint was the leveraged buyout of Clear Channel by Bain, Thomas H. Lee, et al.

Several years earlier, in the late 90s and early 00s, some companies and clusters were being purchased at 10x, 12x or even 15x ebitda multiples.

With such outrageously lucrative valuation multiples being offered, I certainly cannot fault the sellers for taking the cash.

 

[TheBigA]

Several years earlier, in the late 90s and early 00s, some companies and clusters were being purchased at 10x, 12x or even 15x ebitda multiples.

I was taught in business school that you base your price on whatever the market will bear. At the time, that was market price. You have to consider that by the late 90s, there was a lot of precedent to those multiples. The feeding frenzy had been going on since the 1980s. Search the name Robert F.X. Sillerman. If a company is willing to lend money at that price, then that is market price. Bain realized their mistake, but it was too late, and the courts forced them to follow through with their agreement. Farid Suleman also challenged the price when he bought ABC Radio, and he won. But his renegotiation wasn't low enough to save him from bankruptcy just a few years later.