-
Get involved.
We want your input!
Apply for Membership and join the conversations about everything related to broadcasting.
After we receive your registration, a moderator will review it. After your registration is approved, you will be permitted to post.
If you use a disposable or false email address, your registration will be rejected.
After your membership is approved, please take a minute to tell us a little bit about yourself.
https://www.radiodiscussions.com/forums/introduce-yourself.1088/
Thanks in advance and have fun!
RadioDiscussions Administrators
Audacy Filed For Bankruptcy
- Thread starter exdjted
- Start date
The judge probably has clerks to handle a lot of stuff too
They might be able to sell off some studios/offices and expedite consolidation of back-office operations, but depending on the location, commercial real estate is as depressed as broadcast M&A. Not a great time to sell.
It will be like the 1-800-GOT-JUNK ads they run, except for debt.
All you have to do is point, and the debt disappears.
All you have to do is point, and the debt disappears.
The disclosure statement and plan of reorganization were posted last night. DIP Lenders (up to $32 million in exposure) will have the ability to roll their exposure over into a first lien exit term loan (and receive a ratable portion of 10 percent of new co common stock) or receive payment in case upon exit
Prepetition 1st lien lenders will share in 75 percent of pre-diluted common stock in the new co. They will also be able to roll over a small portion of their prepetition 1st lien loan balance into a ~$218 million 1st lien, second out exit term loan. (The $32 million DIP loan, to the extent not paid in cash, would convert to a 1st lien, first out exit term loan.). I'm using rough figures here; monetary amounts are not necessarily exact.
Prepetition 2nd lien lenders will share in 15 percent of pre-diluted common stock in the new co, which is better treatment for them than I anticipated. I was expecting them to get maybe 5 percent of pre-diluted common stock. This concession by 1st lien lenders to the 2nd lien lenders is why a pre-pack filing was possible.
Post-emergence, the company will have a $250 million 1st lien exit term loan, subdivided into 1st out and 2nd out tranches, as noted above.
The asset securitization facility, which has been increased from $75 million to $100 million, will remain in place post-emergence at a $100 million level.
It appears there will not be a traditional revolving line of credit post-emergence.
All prepetition equity interests will be cancelled.
New co equity will be subject to dilution by the management incentive plan (up to 10 percent of fully diluted stock - which is a typical percentage) plus two tranches of warrants (I need to read the plan more thoroughly to assess eligibility and the circumstances under which these would be issued).
The Disclosure Statement estimates the prepetition 1st lien lenders at best would receive economic value equal to only 68.6 percent of their claim amount, which helps explain why I'm surprised the 2nd lien lenders are being offered so much. All of the prepetition 2nd lien claim, in theory, is "out of the money". However, as a result of successful negotiation, their proposed consideration equates to something like a 4.6 cents to 6.8 cents on the dollar recovery, which is better than zero!
Over 86 percent of prepetition 1st lien claims and over 73 percent of prepetition 2nd lien claims have tendered ballots with votes in the affirmative. Prepetition equity holders are presumed to have rejected the plan and are asked to be treated as non-voting (this is pretty standard procedure). General unsecured claims consisting of day to day items are asked to be paid in full or reinstated, which is standard operating procedure in chapter 11, and thus, the class is unimpaired and non-voting.
Thus, this is a true pre-pack filing, likelihood of confirmation is high, prepetition equity holders will get squat, and the 2nd lien lenders made out better than I anticipated.
I will post tonight regarding Board of Directors selection. I will also see what I can find regarding cash levels.
Prepetition 1st lien lenders will share in 75 percent of pre-diluted common stock in the new co. They will also be able to roll over a small portion of their prepetition 1st lien loan balance into a ~$218 million 1st lien, second out exit term loan. (The $32 million DIP loan, to the extent not paid in cash, would convert to a 1st lien, first out exit term loan.). I'm using rough figures here; monetary amounts are not necessarily exact.
Prepetition 2nd lien lenders will share in 15 percent of pre-diluted common stock in the new co, which is better treatment for them than I anticipated. I was expecting them to get maybe 5 percent of pre-diluted common stock. This concession by 1st lien lenders to the 2nd lien lenders is why a pre-pack filing was possible.
Post-emergence, the company will have a $250 million 1st lien exit term loan, subdivided into 1st out and 2nd out tranches, as noted above.
The asset securitization facility, which has been increased from $75 million to $100 million, will remain in place post-emergence at a $100 million level.
It appears there will not be a traditional revolving line of credit post-emergence.
All prepetition equity interests will be cancelled.
New co equity will be subject to dilution by the management incentive plan (up to 10 percent of fully diluted stock - which is a typical percentage) plus two tranches of warrants (I need to read the plan more thoroughly to assess eligibility and the circumstances under which these would be issued).
The Disclosure Statement estimates the prepetition 1st lien lenders at best would receive economic value equal to only 68.6 percent of their claim amount, which helps explain why I'm surprised the 2nd lien lenders are being offered so much. All of the prepetition 2nd lien claim, in theory, is "out of the money". However, as a result of successful negotiation, their proposed consideration equates to something like a 4.6 cents to 6.8 cents on the dollar recovery, which is better than zero!
Over 86 percent of prepetition 1st lien claims and over 73 percent of prepetition 2nd lien claims have tendered ballots with votes in the affirmative. Prepetition equity holders are presumed to have rejected the plan and are asked to be treated as non-voting (this is pretty standard procedure). General unsecured claims consisting of day to day items are asked to be paid in full or reinstated, which is standard operating procedure in chapter 11, and thus, the class is unimpaired and non-voting.
Thus, this is a true pre-pack filing, likelihood of confirmation is high, prepetition equity holders will get squat, and the 2nd lien lenders made out better than I anticipated.
I will post tonight regarding Board of Directors selection. I will also see what I can find regarding cash levels.
Last edited:
Per Exhibit F to the Plan of Reorganization:
"Based on the aforementioned analyses, and other information described herein and solelyfor purposes of the Plan, the estimated range of Enterprise Value of the Reorganized Debtors, collectively, as of the assumed Effective Date, is approximately $600 million to approximately $800 million (with the mid-point of such range being approximately $700 million)." That range is a bit high in my eyes, but not absurdly so.
I wrote several weeks back that my view of EV was a range of $550 million to $750 million:
So, my range only varied from PJT's range by $50 million on both the low end and high end.
Exhibit E projects FY 2024 Adjusted EBITDA of $138 million, which seems like an optimistic projection to me. I think $100 million to $125 million is more realistic.
For those curious as to what a Chapter 7 forced liquidation would theoretically bring, that analysis is presented on page 576 of 595. The mid-point of the recovery range under such a scenario is a paltry $204.8 million, which certainly justifies the decision to reorganize in Chapter 11.
The initial DIP budget (26-week cash flow forecast) is presented on page 557 of 595. Audacy was down to about $37 million of cash. With proceeds from the DIP facility along with net operating cash flow, they are forecast to end the week with nearly $78 million of unrestricted cash. Although a 26-week cash flow forecast was provided, I am not expecting plan confirmation to take that much time.
During BK proceedings, only DIP facility and securitization facility interest will be paid in cash, which is standard procedure when the prepetition facilities are deemed impaired.
"Based on the aforementioned analyses, and other information described herein and solelyfor purposes of the Plan, the estimated range of Enterprise Value of the Reorganized Debtors, collectively, as of the assumed Effective Date, is approximately $600 million to approximately $800 million (with the mid-point of such range being approximately $700 million)." That range is a bit high in my eyes, but not absurdly so.
I wrote several weeks back that my view of EV was a range of $550 million to $750 million:
So, my range only varied from PJT's range by $50 million on both the low end and high end.
Exhibit E projects FY 2024 Adjusted EBITDA of $138 million, which seems like an optimistic projection to me. I think $100 million to $125 million is more realistic.
For those curious as to what a Chapter 7 forced liquidation would theoretically bring, that analysis is presented on page 576 of 595. The mid-point of the recovery range under such a scenario is a paltry $204.8 million, which certainly justifies the decision to reorganize in Chapter 11.
The initial DIP budget (26-week cash flow forecast) is presented on page 557 of 595. Audacy was down to about $37 million of cash. With proceeds from the DIP facility along with net operating cash flow, they are forecast to end the week with nearly $78 million of unrestricted cash. Although a 26-week cash flow forecast was provided, I am not expecting plan confirmation to take that much time.
During BK proceedings, only DIP facility and securitization facility interest will be paid in cash, which is standard procedure when the prepetition facilities are deemed impaired.
Great analysis Mark. Thank you. Interesting, so the Field's walk away with? Just some warrants?
Thanks! They will get nada, zip, zilch for their prepetition equity. David and other managers upon meeting certain goals could qualify for stock grants under the management incentive plan. I need to do further research on the warrants question.
This evening, I will research how board of directors appointment is proposed to work.
I will also see if any contract rejections are posted (leases, talent contracts, content contracts, etc), although such info is not required to be posted right out of the gate. Generally, the petitioner has 60 days from filing to reject prepetition executory contracts. With this being a prepack, that info might already be available.
This evening, I will research how board of directors appointment is proposed to work.
I will also see if any contract rejections are posted (leases, talent contracts, content contracts, etc), although such info is not required to be posted right out of the gate. Generally, the petitioner has 60 days from filing to reject prepetition executory contracts. With this being a prepack, that info might already be available.
Last edited:
I second that! Fascinating reading!👍
Mark, just a quick note to say "thanks" for your very succinct and clear explanation of a complex deal. It is great to have a knowledgeable person here to clarify things!
Indeed. Generally a 'Receiver' will be named to be the face of the new entity to the Commission, and representative of the reorganization. Assuming the Receiver qualifies and the new ownership group is approved, then the licenses will be transferred to the new entity through the reorg.
Hmm. You talk a lot about common stock. Is there no preferred stock in the plan?
Thanks for the gracious words! Much appreciated.
As expected, stock in Audacy collapsed on Monday.
www.insideradio.com
Audacy Shares Tumble 47% Following Bankruptcy Filing.
Audacy shares lost nearly half their value on Monday as its stock price fell to about a dime in the wake of the weekend announcement that the company had filed
Not a stockbroker but I didn't think it was possible to trade stock in a company once it had filed for bankruptcy?
If you read the articles in this thread, they said the stock would continue to trade until the court hearing next month.
I need to make a minor correction to an earlier remark of mine:
82.2% of prepetition first lien claims have tendered ballots in favor of the plan of reorganization (earlier, I incorrectly stated 86 percent).
Some topics that may be of interest....
The page numbers below refer to this document:
David Field's employment agreement:
Per page 318 of 595 of the combined disclosure statement / plan of reorganization PDF (this page is actually part of the Restructuring Support Agreement that was agreed to between the Company and the Creditors prior to the BK filing):
David Field’s employment agreement to be modified prior to chapter 11 filing as follows:
i. If a long-term employment agreement is negotiated within 120 days after the Plan Effective Date, then that agreement would supersede the agreement existing as of the Petition Date;
ii. Mr. Field will remain on New Board in a non-Chairman capacity while still employed and to serve in consulting role on New Board member selection (but without voting role for selection);
iii. Reorganized Audacy can terminate Mr. Field’s employment agreement following the Plan Effective Date, in which case Mr. Field would assist with transition and receive salary through the later of (i) the end of the transition period referred to in clause (iv) below or (ii) December 31, 2024, plus severance prorated “earned” bonus; and
iv. If no agreement on long-term employment is reached within 120 days following the Plan Effective Date, then Mr. Field can terminate by providing notice after 120 days and before 150 days following the Plan Effective Date; however, Mr. Field is required to transition for the earlier of 150 days or until a successor CEO is appointed, during which period Mr. Field would only receive (i) contract severance and (ii) base salary during the transition period (without a prorated bonus).
Board of Director appointment rights:
Per page 53 of 595 of the combined disclosure statement / plan of reorganization PDF to which I linked this morning:
"As of the Effective Date, the terms of the current members of the board of directors of Parent shall expire and the New Board shall be appointed. Except to the extent that a current director on the board of directors of Parent is designated to serve on the New Board, the current directors on the board of directors of Parent prior to the Effective Date, in their capacities as such, shall be deemed to have resigned or shall otherwise cease to be a director of Parent on the Effective Date. Each independent director of the Debtors, in such capacity, shall not have any of his/her respective privileged and confidential documents, communications, or information transferred (or deemed transferred) to the Reorganized Debtors, Reorganized Parent, or any other Entity without such director’s prior written consent."
Per page 316:
"The board of directors of Reorganized Audacy (the “New Board”) shall be comprised of seven (7) members selected as follows: (a) Five (5) members selected by the Ad Hoc First Lien Group, (b) One (1) member selected by the Ad Hoc Second Lien Group (which member must be to the reasonable satisfaction of the Required Consenting First Lien Lenders and be an “industry” expert or specialist), and (c) David Field while employed by Reorganized Audacy.
To summarize:
- David Field (to the extent he remains employed) will continue to serve on the Board but cannot be the Chairman.
- The prepetition First Lien lenders will (indirectly) appoint five board members.
- The prepetition Second Lien lenders will (indirectly) appoint one board member.
- I wrote "indirectly" because the above lender groups will not appoint board members directly. Instead, third-party advisors they've retained will make the appointments. The advisor names can be found at the bottom of page 175 and top of page 176.
Will the Reorganized Company be privately owned or publicly traded?
Privately owned.
Per page 316 of 595: "Reorganized Audacy will be a private company, to the extent permitted by applicable law. New Governance Documents for Reorganized Audacy following the Plan Effective Date shall contain customary protections for minority equity holders in form and substance acceptable to the Required Consenting Second Lien Noteholders."
Warrants:
There are "Special Warrants" and "New Second Lien Warrants."
The New Second Lien Warrants are exercisable within four years if Equity Value (not to be confused with enterprise value) exceeds $771 million. Bear in mind day one equity value is estimated to be a range of $250 million to $450 million (since opening funded debt is expected to be $350 million and the opening enterprise value range is $600 million to $800 million). It is certainly possible these Warrants will expire without ever being "in the money," in which case, they'd be worthless.
The New Second Lien Warrants also have what is known as Black-Scholes protection in the first two years of existence. This primarily would come into play if the Company were to be sold.
More info on that concept can be found here: Avoiding Illusory Recoveries: The Importance Of Black-Scholes Protections For Warrants Issued Under A Bankruptcy Plan - Commodities/Derivatives/Stock Exchanges - United States.
The Special Warrants appear to be an optional tool to address potential FCC compliance issues. Per page 65 of 595:
"The Debtors shall file the required FCC Short Form Application(s) and the FCC Interim Long Form Application(s) as promptly as practicable following the Petition Date and in accordance with the Restructuring Support Agreement.
The Debtors shall file a Petition for Declaratory Ruling and FCC Second Long Form Application (if applicable) after the Effective Date (and if applicable, in accordance with any FCC requirements) and, if such filings are made prior to the Effective Date, their grant shall not be a condition to Consummation. After the filing of the FCC Interim Long Form Application(s), any person who thereafter acquires a DIP Claim, a First Lien Claim, or a Second Lien Notes Claim may be issued Special Warrants in lieu of any New Common Stock that would otherwise be issued to such Person under the Plan to the extent that the issuance of New Common Stock would be inconsistent with the Communications Laws and/or the FCC Interim Long Form Approval.
In addition, the Debtors may, with the consent of the Required Consenting First Lien Lenders and the Required Consenting Second Lien Noteholders, request that the Bankruptcy Court implement restrictions on trading of Claims and Equity Interests that might adversely affect the FCC Approval Process. The Debtors or Reorganized Debtors, as applicable, shall diligently prosecute the FCC Applications, including the Petition for Declaratory Ruling, that the Debtors or Reorganized Debtors file, and shall promptly provide such additional documents or information requested by the FCC in connection with its review of the foregoing."
82.2% of prepetition first lien claims have tendered ballots in favor of the plan of reorganization (earlier, I incorrectly stated 86 percent).
Some topics that may be of interest....
The page numbers below refer to this document:
David Field's employment agreement:
Per page 318 of 595 of the combined disclosure statement / plan of reorganization PDF (this page is actually part of the Restructuring Support Agreement that was agreed to between the Company and the Creditors prior to the BK filing):
David Field’s employment agreement to be modified prior to chapter 11 filing as follows:
i. If a long-term employment agreement is negotiated within 120 days after the Plan Effective Date, then that agreement would supersede the agreement existing as of the Petition Date;
ii. Mr. Field will remain on New Board in a non-Chairman capacity while still employed and to serve in consulting role on New Board member selection (but without voting role for selection);
iii. Reorganized Audacy can terminate Mr. Field’s employment agreement following the Plan Effective Date, in which case Mr. Field would assist with transition and receive salary through the later of (i) the end of the transition period referred to in clause (iv) below or (ii) December 31, 2024, plus severance prorated “earned” bonus; and
iv. If no agreement on long-term employment is reached within 120 days following the Plan Effective Date, then Mr. Field can terminate by providing notice after 120 days and before 150 days following the Plan Effective Date; however, Mr. Field is required to transition for the earlier of 150 days or until a successor CEO is appointed, during which period Mr. Field would only receive (i) contract severance and (ii) base salary during the transition period (without a prorated bonus).
Board of Director appointment rights:
Per page 53 of 595 of the combined disclosure statement / plan of reorganization PDF to which I linked this morning:
"As of the Effective Date, the terms of the current members of the board of directors of Parent shall expire and the New Board shall be appointed. Except to the extent that a current director on the board of directors of Parent is designated to serve on the New Board, the current directors on the board of directors of Parent prior to the Effective Date, in their capacities as such, shall be deemed to have resigned or shall otherwise cease to be a director of Parent on the Effective Date. Each independent director of the Debtors, in such capacity, shall not have any of his/her respective privileged and confidential documents, communications, or information transferred (or deemed transferred) to the Reorganized Debtors, Reorganized Parent, or any other Entity without such director’s prior written consent."
Per page 316:
"The board of directors of Reorganized Audacy (the “New Board”) shall be comprised of seven (7) members selected as follows: (a) Five (5) members selected by the Ad Hoc First Lien Group, (b) One (1) member selected by the Ad Hoc Second Lien Group (which member must be to the reasonable satisfaction of the Required Consenting First Lien Lenders and be an “industry” expert or specialist), and (c) David Field while employed by Reorganized Audacy.
To summarize:
- David Field (to the extent he remains employed) will continue to serve on the Board but cannot be the Chairman.
- The prepetition First Lien lenders will (indirectly) appoint five board members.
- The prepetition Second Lien lenders will (indirectly) appoint one board member.
- I wrote "indirectly" because the above lender groups will not appoint board members directly. Instead, third-party advisors they've retained will make the appointments. The advisor names can be found at the bottom of page 175 and top of page 176.
Will the Reorganized Company be privately owned or publicly traded?
Privately owned.
Per page 316 of 595: "Reorganized Audacy will be a private company, to the extent permitted by applicable law. New Governance Documents for Reorganized Audacy following the Plan Effective Date shall contain customary protections for minority equity holders in form and substance acceptable to the Required Consenting Second Lien Noteholders."
Warrants:
There are "Special Warrants" and "New Second Lien Warrants."
The New Second Lien Warrants are exercisable within four years if Equity Value (not to be confused with enterprise value) exceeds $771 million. Bear in mind day one equity value is estimated to be a range of $250 million to $450 million (since opening funded debt is expected to be $350 million and the opening enterprise value range is $600 million to $800 million). It is certainly possible these Warrants will expire without ever being "in the money," in which case, they'd be worthless.
The New Second Lien Warrants also have what is known as Black-Scholes protection in the first two years of existence. This primarily would come into play if the Company were to be sold.
More info on that concept can be found here: Avoiding Illusory Recoveries: The Importance Of Black-Scholes Protections For Warrants Issued Under A Bankruptcy Plan - Commodities/Derivatives/Stock Exchanges - United States.
The Special Warrants appear to be an optional tool to address potential FCC compliance issues. Per page 65 of 595:
"The Debtors shall file the required FCC Short Form Application(s) and the FCC Interim Long Form Application(s) as promptly as practicable following the Petition Date and in accordance with the Restructuring Support Agreement.
The Debtors shall file a Petition for Declaratory Ruling and FCC Second Long Form Application (if applicable) after the Effective Date (and if applicable, in accordance with any FCC requirements) and, if such filings are made prior to the Effective Date, their grant shall not be a condition to Consummation. After the filing of the FCC Interim Long Form Application(s), any person who thereafter acquires a DIP Claim, a First Lien Claim, or a Second Lien Notes Claim may be issued Special Warrants in lieu of any New Common Stock that would otherwise be issued to such Person under the Plan to the extent that the issuance of New Common Stock would be inconsistent with the Communications Laws and/or the FCC Interim Long Form Approval.
In addition, the Debtors may, with the consent of the Required Consenting First Lien Lenders and the Required Consenting Second Lien Noteholders, request that the Bankruptcy Court implement restrictions on trading of Claims and Equity Interests that might adversely affect the FCC Approval Process. The Debtors or Reorganized Debtors, as applicable, shall diligently prosecute the FCC Applications, including the Petition for Declaratory Ruling, that the Debtors or Reorganized Debtors file, and shall promptly provide such additional documents or information requested by the FCC in connection with its review of the foregoing."
Last edited:
The one number I still haven't seen is the amount of equity the lien holder's will get. I imagine it's a lot. But I remember it was a point of contention during the iHeart bankruptcy. I can only guess that number will become public during the hearing next month?
- Status