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Audacy Filed For Bankruptcy

Big Radio corporations are always the victims of circumstance and the executives never bear any responsibility for their actions that lead their businesses to fail.

Except that in the case of Audacy, David Field and his father owned more than a quarter of the company stock. As a result of this, they have lost millions of dollars of their own money, and David's father has lost control of the company he founded and ran for 50 years. I'd say they're bearing responsibility for their actions. Posting facts is not "gaslighting."

Maybe you would have preferred CBS Radio to have been sold to religious broadcasters. That way it wouldn't have gone bankrupt.
 
Anyone who says that does so with the benefit of hindsight. If you go back to all of the financial media at the time, no one was criticizing the price. In fact, compared to previous radio deals, this one seemed to be a bargain. CBS was anxious to get rid of radio, and this was seen as a fire sale price. What I do agree with is the debt was structured in such a way that a big part of the principal was due in the first ten years. That was unsustainable.

I respectfully disagree to an extent. Doing an LBO at over 4x total leverage in an unusually low interest rate environment (when you know rates will be more expensive when it comes time to refinance) on a very large business in a steadily declining industry - which also happens to be highly sensitive to macroeconomic cycles - is not very conservative underwriting.

General expectation is for cash flow to be sufficient to theoretically clear 100 percent of senior debt (in this case, the 1st lien debt) within 5 to 7 years.

The 1st lien committed debt was underwritten to about 2.3x pro forma ebitda, which in and of itself is not unreasonable.

However, when adding on the second lien debt, whose interest coupon was strictly of a cash pay nature (i.e. such payment cannot be deferred other than a 30 day grace period), we're getting closer to 4.5x total leverage. When removing the synergistic cost savings assumptions which may or may not have been realistic, the ratio may be closer to 5x.

Throw in a rising interest rate environment as debt balloons are nearing maturity, inadequate covenant guard rails relative to capex spend (nine figures were largely wasted on digital platform acquisitions and build outs), and sensitivity to macro environment cycles, and you've more or less have a ticking time bomb.
 
Big Radio corporations are always the victims of circumstance and the executives never bear any responsibility for their actions that lead their businesses to fail.
But in this case, the lenders are losing the most and it was their responsibility to use good judgement and and a proper range of economic models to make sure the deal would prosper.

Yet there was a consortium of lenders involved, all with extensive business lending experience and skills. The lenders thought this was an attractive deal.
That is the message from the dominant members of this site who constantly gaslight us with their posts to that effect.
There is nothing "gaslighty" about looking first at the lenders.

If any group has the best set of experience and knowledge, it would be those who approved the loan package. They did not have a model that included the possibility of a plague year... let alone one that would last three years. And, thus they did not anticipate, in any model, the resultant inflationary recession and the vastly increased use of the Internet during the isolation years of the pandemic.
 
I respectfully disagree to an extent. Doing an LBO at over 4x total leverage in an unusually low interest rate environment (when you know rates will be more expensive when it comes time to refinance) on a very large business in a steadily declining industry - which also happens to be highly sensitive to macroeconomic cycles - is not very conservative underwriting.

Then the lenders should not have financed this deal. Unless it was their intent to become owners of this property.
 
As I read this thread I wonder what people thought David Field should have done differently that would not have lead to eventual bankruptcy given external factors, with the exception of not buying CBS Radio. Because if new owners place new leadership in place what would we expect them to do differently in running Audacy. If there is new leadership their job might be easier now that most debt is being extinguished.
 
I wonder what people thought David Field should have done differently that would not have lead to eventual bankruptcy given external factors, with the exception of not buying CBS Radio.

Keep in mind the original deal was a reverse morris trust, which meant Entercom was actually partners in CBS Radio with the CBS stockholders. On the surface, that gave Entercom shared risk. What apparently happened is most CBS stockholders promptly sold their stock in the new venture, which is what led to some early problems in the deal (before the pandemic). This may have led to Field buying a lot of stock as CBS sold their shares. By doing that, he hoped he could prevent what eventually happened.

If there is new leadership their job might be easier now that most debt is being extinguished.

As demonstrated by Cumulus and iHeart. Both have been operating without major issues since leaving bankruptcy.
 
As I read this thread I wonder what people thought David Field should have done differently that would not have lead to eventual bankruptcy given external factors, with the exception of not buying CBS Radio.

Buying CBS Radio was the factor that led to bankruptcy. Had Field not done the deal, he wouldn't be in this situation today. Entercom/Audacy was considered reasonably well-run and was humming along fine. At some point in the future, terrestrial radio might not be a self-sustaining business. We're not there yet, though, and it doesn't seem like that moment is close-at-hand.

Because if new owners place new leadership in place what would we expect them to do differently in running Audacy. If there is new leadership their job might be easier now that most debt is being extinguished.

Audacy's operations, in and of themselves, are profitable. Without all the debt, the leadership, whether it's Field or someone new, should fare better. I remember hearing about an investor who bought debt in both Audacy and Cumulus. I don't know how he fares in the bankruptcy proceedings, but he seemed interested, at least a few months ago, in trying to force a shotgun marriage of the two at some point. Don't know if that will be more or less likely once Audacy gets out of bankruptcy, but some people are still bullish on radio. If someone comes in with the right offer, the lenders would undoutedly sell Audacy. When that right offer arrives is the question; it might not be anytime soon.
 
At some point in the future, terrestrial radio might not be a self-sustaining business. We're not there yet, though, and it doesn't seem like that moment is close-at-hand.

In my opinion, we ARE there now, and that's why I recommend all current radio owners to transition to digital content companies. Most of them have already done that. Audacy has done a terrible job, which is why their digital revenues are so low. My view is given the quality of content they own and create, they should be among the top digital creators in the country. But they still see themselves as being in the local radio business. I expect that will be the biggest change we see as they emerge from bankruptcy.

Historically, radio began as part of other businesses, from retail to insurance to electronics to manufacturing. That's how the business grew. Radio needs a second revenue stream. On-air advertising isn't enough.
 
In my opinion, we ARE there now, and that's why I recommend all current radio owners to transition to digital content companies. Most of them have already done that. Audacy has done a terrible job, which is why their digital revenues are so low. My view is given the quality of content they own and create, they should be among the top digital creators in the country. But they still see themselves as being in the local radio business. I expect that will be the biggest change we see as they emerge from bankruptcy.

Historically, radio began as part of other businesses, from retail to insurance to electronics to manufacturing. That's how the business grew. Radio needs a second revenue stream. On-air advertising isn't enough.
As someone who generally has a lot of patience with apps, Audacy’s app is absolute trash. It’s beneath any other streaming app it would compete with on download charts, and it is unbelievably buggy. Artists and song titles misspelled or formatted incorrectly (I’ve never seen this on iheart), missing song titles, slow, recently played missing, no cover art, etc. I can search their very own, for example, “The New 96.5” and the station doesn’t even come up. I have to dig for it. There are a lot of very awkward spaces in the app where the UI is just bad.

They updated the app a year or so ago but it still has the same clunky infrastructure behind it. I will say, the sound quality is great, but it needs a massive overhaul to even be considered comparable to iHeart, TuneIn, etc. Trust me - I want to like their app - but every time I’ve downloaded it, I end up deleting it due to frustration. They have a very, very heavy lift ahead of them on this.
 
I do agree with you when you say the lenders definitely have their share of the blame. The same signs I mentioned above were available to them, too, and they went ahead and lent the money. If anything, they should've had more information and actuarial data, which I can't imagine were rosey. Radio has always been a risky investment. Just ask one of the commercial radio station owners of 30 years ago how much he made.
One thing to keep in mind is that the debt that was created as part of the CBS Radio merger has mostly (if not entirely) been paid back, so those bankers made it out fine.

The current holders of the debts issued during a 2019 refinancing are the ones holding the bag.
 
One thing to keep in mind is that the debt that was created as part of the CBS Radio merger has mostly (if not entirely) been paid back, so those bankers made it out fine.

The current holders of the debts issued during a 2019 refinancing are the ones holding the bag.
Yes, and what was refinanced? The CBS merger money!
 
Sure. I wasn't saying that the CBS Radio merger wasn't the root cause, just that the bankers who were involved back in 2017 got their money and ran.
 
As someone who generally has a lot of patience with apps, Audacy’s app is absolute trash. It’s beneath any other streaming app it would compete with on download charts, and it is unbelievably buggy. Artists and song titles misspelled or formatted incorrectly (I’ve never seen this on iheart), missing song titles, slow, recently played missing, no cover art, etc. I can search their very own, for example, “The New 96.5” and the station doesn’t even come up. I have to dig for it. There are a lot of very awkward spaces in the app where the UI is just bad.

I've noticed the Audacy app seems to get worse with every upgrade. When it had that redesign a year to a year and a half ago, it removed Waze integration. It also removed much of the CarPlay functionality the previous design had. Lately, hitting the “Live” button to listen to the stations doesn’t seem to work at all on my phone. Not sure if that’s because I'm using a beta release of iOS 17.3 or if it's just the app itself, but it’s frustrating. I tended to prefer the Audacy app to listen to my local Cumulus stations because I didn’t have to sort through the clutter of TuneIn or iHeart, but it hasn’t worked well for me lately.

I wouldn’t be surprised if part of the reason Audacy came back to TuneIn was because its own app was causing it so much grief. Listening to Audacy stations via TuneIn has been very welcome in the car as TuneIn has a much better car interface. Having two tabs open on my browser at work (iHeart and TuneIn) has also been preferable to having to deal with three.

Even RadioPup, which hadn't had an update in roughly three years, recently released an update that works on CarPlay. Haven’t tried it yet, but I was pleasantly surprised to see it pop up on my CarPlay screen last weekend. I was able to delete the apps for the two Townsquare stations I regularly listen to since I only used them with CarPlay.
 
Just to rant a little: I feel like the modern Internet has cheapened and reduced to mediocrity the experience of almost anything worth doing, from shopping to news to school. Almost nothing is fun, especially with having to remember what feels like a billion cryptic passwords.

That the Internet is obliterating OTA radio is no surprise to me, as it strives to appropriate everything and reduce it to an infinite series of lousy apps that never get better.

I'm glad that I'm old enough to clearly remember a time without a pervasive, always on Internet (I grew up in the 90s with no Internet at all, and we only got dial up sometime between 1998-2001, but I never really used it until 2003 or so), and things were actually easier and more fun to do, if not faster (there's a lot to be said for taking one's time to do things more carefully and thoughtfully).

The one thing that I'll concede the new Internet (Web 3.0?) is that the discovery and research of new music and other media is genuinely easier, but again, less fun because it's almost too easy, because part of the fun – at least for me – is in the challenge of searching through record stores to find what I'm looking for, and discovering other interesting things along the way. Fortunately record stores are having a moment, and their popularity is surging, so they're not likely to disappear any time soon. I like to think that it is perhaps in part because people are feeling like I am: it's more fun!

c
 
One thing to keep in mind is that the debt that was created as part of the CBS Radio merger has mostly (if not entirely) been paid back, so those bankers made it out fine.

The current holders of the debts issued during a 2019 refinancing are the ones holding the bag.
Many of the 2019 debt holders most likely also held the 2017 debt that was refinanced.

Early 2021 would've been a (relatively) lucrative time to sell debt on the secondary market. The stock on a pre-reverse split basis was trading around $5 a share (an unjustifiably generous valuation), so even with the rising interest rate environment, the notes were probably trading at least in the mid 80 range.
 
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Just to rant a little: I feel like the modern Internet has cheapened and reduced to mediocrity the experience of almost anything worth doing, from shopping to news to school. Almost nothing is fun, especially with having to remember what feels like a billion cryptic passwords.

The internet has been a double-edged sword, for certain. Personally, I hate how easy spreading misinformation and scamming people have become, and the internet has definitely made newspapers an endangered species, which is sad and scary. Keep in mind, if people, in general, enjoyed brick and mortar shopping, the internet wouldn't be a threat to it. The reason some of those experiences have been reduced is because the population, as a whole, doesn't enjoy them very much, though the reasons for that might vary. That also doesn't mean people enjoy using the internet either; it just means it's easier and takes less time to do something they already thought was a chore. I don't care a lot for Uber or Lyft, but riding a taxi was always an unpleasant experience. Uber and Lyft are at least easy. I can remember getting out of the Blue Note after a show in college and being unable to get a cab. Luckily, at the time, I just lived a couple miles from downtown, but I had to stumble drunk through downtown and campus and cross a busy street right before the speed limit went up to 55 in the wee hours of the morning. Then, the next morning, I either had to get a friend to take me back downtown to get my car, had to find a reason to go back downtown on foot, or had to call a cab, which would pick me up whenever it felt like it. I overindulge a lot less now that I'm near 50 than I did in my mid-20's, but, when I need a ride for whatever reason, I can pull up the two apps, compare prices, choose which I want, and I'll know in real time where my driver is. It's not perfect, but it's a lot better than having to get a cab, not knowing how much your ride is going to cost, and the drivers are usually more pleasant than the cabbies.

That the Internet is obliterating OTA radio is no surprise to me, as it strives to appropriate everything and reduce it to an infinite series of lousy apps that never get better.

As we've previously discussed, a one-to-many medium is always going to have its struggles against what's theoretically a one-to-one medium. Personally, I've always found the playlists on Pandora, Spotify, and Apple Music to be boring and repetitive. I might not feel that way if I were my niece's age as she's mostly listening to top-40, which is already mostly repetitive, but the streaming services' playlists have always sounded lousy to me. Maybe AI curated playlists are better, but I don't use those services enough to know and, the rare recent times I have, I haven't noticed a difference. I also realize radio has a problem with stale and impersonal playlists. With some PD's overseeing multiple stations, they can't go over the playlist with a fine-toothed comb and make sure they sound perfect. Then again, the F10 and print PD who didn't really want the job or only wanted it for the title and the opportunity has existed since the end of the card system, which had its own set of problems.

The one thing that I'll concede the new Internet (Web 3.0?) is that the discovery and research of new music and other media is genuinely easier, but again, less fun because it's almost too easy, because part of the fun – at least for me – is in the challenge of searching through record stores to find what I'm looking for, and discovering other interesting things along the way. Fortunately record stores are having a moment, and their popularity is surging, so they're not likely to disappear any time soon. I like to think that it is perhaps in part because people are feeling like I am: it's more fun!

The neighborhood record store didn't get killed by the internet; the big box retailers put most of them out of business by the early 90's. My neighborhood never had such a store to speak of, probably because there were a Target, a Sears, and a Service Merchandise less than a mile away. A Venture opened practically across the street from the Service Merchandise, and a couple blocks closer to my house, around 1990. A small record store never had a chance. Maybe the nostalgia of the record store is a bigger draw than I credit it, but I'm a little more cynical. Borders and Barnes and Noble put the small neighborhood bookstores out of business by the early part of the century. They're coming back, too, but I tend to think it's less because of any love for the small bookstore than that the big bookstores are getting squeezed. Borders went out of business more than ten years ago, and it also owned either Waldenbooks or B. Dalton, which it shut down several years before its own reckoning. The other was owned by Barnes and Noble, which shut it down around the same time. Those smaller bookstores offered a niche that people have realized can be profitable again. If you're going to operate a neighborhood bookstore, you need, however, to be web savvy. That's going to be almost 40% of your business at a minimum. I tend to think record stores are coming back because, while there's always been a market for it, it's small enough now that the big guys don't put much effort into it. Around 1999, Alan Jackson had a hit called "Little Man" about big chains coming in and shutting down local merchants. The song identified the problem well but concluded people didn't know they were "killing the little man." That part was wrong. People knew exactly what they were doing. They wanted the lower prices, convenience, and immediacy of the bigger retailers. Plus, the jobs those companies offered were generally better than the ones the local stores offered.
 
I think Beasley will need to reorganize - either via Chapter 11 or via an out-of-court agreement - no later than mid 2025 unless assets are sold to raise cash (a la WJBR in Wilmington), in which case they might be able to kick the can down the road for a bit. They have $287 million of senior secured notes coming due February 1, 2026.

Anyone's guess is as good as my own in terms of whether the company will be able to receive an unqualified audit opinion as to its fiscal year 2023 financial statements. I have not reviewed the Indenture for the senior secured notes to ascertain if failure to receive an unqualified audit opinion would constitute an Event of Default.

The company's trailing 12-month Adjusted EBITDA is in the ballpark of $10 million, which is absolutely abysmal for a broadcasting company carrying $277 million of secured debt!

The company had just under $30 million of cash on hand at September 30. It burned through just under $10 million of cash in the first nine months of 2023 alone. In October 2023, ~$6.3 million of cash was used to repurchased $10 million of par value senior secured notes, meaning the remaining debt load is now ~$277 million. (Whomever decided to exit at 63 cents on the dollar was very, very wise!)

I suspect they will end 2023 with a cash balance near or just above $25 million thanks to the $5 million received from the sale of WJBR.
 
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