Audacy granted a 30 day extension to make its missed bond payment

[davideduardo]

They are clearly in a very tight credit box. My guess is they have some station sales in the works that are better pricing than sales thru Chapt 11. It wouldn't surprise me if EMF is in the mix on many of their FMs in fill-in opps for EMF that are not strong sports markets for Audacy. Audacy will still need reorg thru Chap 11, like Cumulus and IHeart did. Stock value is zero, bonds would be lucking to get 40% value. It will be interesting to see how flagship sports deals get handled, many MLB teams got burned on Diamond Sports/Bally Chapt 11. Audacy stations are flagship for Red Sox, Cubs, Yankees, Phillies, Nationals and Tigers.

You are awfulizing the Audacy situation. The station group is profitable, but would not be if broken up. Sales of individual stations would not come close to paying debt. None of the big groups would be in a buying position unless clusters were split up. Unlikely.

The likely solution is restructuring debt with considerable equity going to lenders.

EMF's new management is cutting way back on acquisitions and prices being paid. Nobody wants the whole Audacy group, and it is worth very much less if split up. And the sports deals are part of the station group.

 

[101tm]

Exactly. If you are in a "swing State" and/or important Primary State, and your station is in a large market in that State, the presidential campaign ads are there. If you are not, then radio primarily gets the state and local contests. You have to look at that revenue as a bonus, not core.

Also, we are in an abnormal primary season. The the republican contenders are likely going to have to hit the brakes on spending much because it’s going to be hard to get money from any donors when you’re polling in the single digits.

Station sales, that aren’t strategic or cashing out of underperforming markets, are a very short term solution and cut off revenue streams for the company. It’s not the stations as a whole that are causing this mess. They can sell stations (if they could even find a buyer) but that’s not going to fix the problem, and they’ll just have less profit.

 

[Lefty61]

You are awfulizing the Audacy situation. The station group is profitable, but would not be if broken up. Sales of individual stations would not come close to paying debt. None of the big groups would be in a buying position unless clusters were split up. Unlikely.

The likely solution is restructuring debt with considerable equity going to lenders.

EMF's new management is cutting way back on acquisitions and prices being paid. Nobody wants the whole Audacy group, and it is worth very much less if split up. And the sports deals are part of the station group.

Station group with declining velocity, especially in music, out of cash, and no way to get liquidity beyond November without Chapt 11 or some sales, sounds distressing to me. Never suggested whole group is for sale, but its clear they need to reposition and music stations in non-sports markets should be in play. Certainly not gonna help start of Q4 that only one of their flagships had meaningful October games. If they're not selling some stations, they got no cash coming in, and with 15 clear channel AMs, they aren't monetizing those in a station sale.

 

[TheBigA]

Audacy stations are flagship for Red Sox, Cubs, Yankees, Phillies, Nationals and Tigers.

Radio pro sports deals are a lot smaller. I don't recall any teams getting dropped in iHeart or Cumulus bankruptcies.

What hurt Diamond was the deals were negotiated by Fox Sports, and then got sold to Diamond via Disney.

 

[davideduardo]

Station group with declining velocity, especially in music,

Music? Their stations are doing about as well as any other group operator with an assortment of formats and markets is doing.

If there is any failure, it is in the lack of a new media platform and formula for the future. But the stations asa group are not doing badly.

out of cash, and no way to get liquidity beyond November without Chapt 11 or some sales, sounds distressing to me.

There are a number of options that can be had in consort with the lenders that will give both parties an opportunity to get beyond the current stressed economy.

Never suggested whole group is for sale, but its clear they need to reposition and music stations in non-sports markets should be in play.

You are estimating vastly more value to the sports franchises and stations than truly exist. As BigA says, radio sports deals are a lot smaller. In fact, the team deals are often loss leaders with the money being made from the sports talk programming, not the games.

Certainly not gonna help start of Q4 that only one of their flagships had meaningful October games.

Again, look at the deals. Most give the bulk of revenue to the team and individual local market games are not, alone, singularly profitable; sports deals with both teams and advertisers are done on a season basis, not per-game.

If they're not selling some stations, they got no cash coming in,

The stations, on their own, are profitable and there is cash coming in. The stations on an EBITDA basis are profitable. Just not enough to pay the debt service. But much of that can be negotiated with or without a full bankruptcy.

and with 15 clear channel AMs, they aren't monetizing those in a station sale.

An AM is only as valuable as the local market ratings and revenue. Nobody cares if it is/was a "clear channel".

 

[Kelly A]

Station group with declining velocity, especially in music, out of cash, and no way to get liquidity beyond November without Chapt 11 or some sales, sounds distressing to me. Never suggested whole group is for sale, but its clear they need to reposition and music stations in non-sports markets should be in play. Certainly not gonna help start of Q4 that only one of their flagships had meaningful October games. If they're not selling some stations, they got no cash coming in, and with 15 clear channel AMs, they aren't monetizing those in a station sale.

Wow, there's so much wrong with just about everything you said: Here are some top line comment:
Station groups don't own stations to sell them. They sell advertising on the stations. And as David pointed out already, Audacy does well in most of their larger markets.
Next point: Station groups don't make cuts in Q4 to save Q4. Cuts in Q4 are to realize savings in Q1.
And finally; AM stations have few if any new listeners coming in to replace the 60+ audience that's aging-out. Because of the aforementioned combined with inferior audio quality in just about every way and competitors like smartphones, AM stations devalued much more than FM or TV. In other words, AM stations are white elephants of the broadcast world. There are few groups interested in increasing their AM station count.

 

[RadioGuy1864]

There are few groups interested in increasing their AM station count.

Even the religious groups don't want AM's. At this point, if they produce revenue, you keep them until such time as they don't produce meaningful revenue anymore. Then you sell for what ever you can get, donate them, or sell the tower land and hand in the license. But we are talking several years from now, not next week.

 

[Mark Roberts]

What I'm not understanding here is the opprobrium directed at Audacy. It's almost as if there's a cheering section for its failure. Yet Audacy runs some halfway-decent news and news/talk stations, has some respected music stations, and has recognized where some of its decisions have failed and is addressing those situations. It's going through the same refinancing cycle that IHM and Cumulus have gone through, minus the advantage of a low interest-rate environment. Yes, they may be in a tough spot, but no lender is going to want a set of broken-down radio stations, either. For better or worse, those lenders are vested in having Audacy be successful - however that's defined, but that usually means making enough money to pay off aforesaid lenders. So there will be negotiations, something will be worked out, and those in charge will live on to see another day. It may not be pretty, but it will function.

I wouldn't buy Audacy stock, but that's not a meaningful statement. They already got their capital from the IPO back when the equity markets were more favorable to them. They could trade on the pink sheets for years and be fine. Sure, some prestige might be lost, but that might actually relieve some pressures, because then they would benefit from lower profit expectations, no one would ever recommend the stock to "widows and orphans", and the company wouldn't be expected to allocate capital to pay dividends.

 

[MarkW]

New 8-K filed this morning. Interest payment grace period on the JPM Chase 1st lien credit agreement is now extended 3 additional business days, meaning the grace period now expires this coming Monday (as opposed to today).

Inline XBRL Viewer

 

[Rusty Muck]

What I'm not understanding here is the opprobrium directed at Audacy. It's almost as if there's a cheering section for its failure.

IMO, a lot of it comes from this weird pining for the industry to return to pre-1996 market conditions when it’s completely impossible and would do more to destroy everything. Nevermind that the pre-1996 market conditions were financially unsustainable even then. When consolidation began, economy of scale dictated what stations sold out, and when.

 

[Kelly A]

IMO, a lot of it comes from this weird pining for the industry to return to pre-1996 market conditions when it’s completely impossible and would do more to destroy everything. Nevermind that the pre-1996 market conditions were financially unsustainable even then. When consolidation began, economy of scale dictated what stations sold out, and when.

Yeah, it's weird. 'Radio isn't the way I grew up with so I hope it all dies.' Seems to align with the whole 'vengeance' attitude that permeates society these days. Could be a curmudgeon factor too. A lot of the participants on this site are over 55.

 

[101tm]

Yeah, it's weird. 'Radio isn't the way I grew up with so I hope it all dies.' Seems to align with the whole 'vengeance' attitude that permeates society these days. Could be a curmudgeon factor too. A lot of the participants on this site are over 55.

I'm not the biggest fan of how Audacy executes some of their formats compared to some of their other larger peers, but the misconception and fascination with "station sales" is baffling. Station sales and format changes may seem "exciting", but I doubt many would be excited with what would probably end up with the signals...they're not going to fire sale them all and have a new owner that flips a ton of stations to 50s and 60s oldies with a live airstaff.

 

[Kelly A]

I'm not the biggest fan of how Audacy executes some of their formats compared to some of their other larger peers, but the misconception and fascination with "station sales" is baffling. Station sales and format changes may seem "exciting", but I doubt many would be excited with what would probably end up with the signals...they're not going to fire sale them all and have a new owner that flips a ton of stations to 50s and 60s oldies with a live airstaff.

I attribute much of the; break up the publicly traded companies and sell off the stations to ma and pa'-thinking to something similar to what's seen in sports fans. When their local sports team struggles, some fans demand heads that include players and the entire coaching staff. When the team still doesn't meet their expectations, they demand it be sold to a different owner.
Realizing that radio isn't a sports team, but clearly, there are fans of the form of media who behave very similarly.

 

[RadioGuy1864]

Extending 3 days at a time. Does that mean they are close to getting a deal done, or are they just postponing and buying time before the inevitable?

 

[Don CT]

Radio pro sports deals are a lot smaller. I don't recall any teams getting dropped in iHeart or Cumulus bankruptcies.

What hurt Diamond was the deals were negotiated by Fox Sports, and then got sold to Diamond via Disney.

What hurt Diamond was that Sinclair set them up to fail.

 

[TheBigA]

Extending 3 days at a time. Does that mean they are close to getting a deal done, or are they just postponing and buying time before the inevitable?

My take is it's similar to how congress deals with the budget, waiting until one hour before default to pass a continuing resolution.

 

[Rusty Muck]

What hurt Diamond was that Sinclair set them up to fail.

Diamond was doomed regardless of the ownership; the cord-cutting environment, a failure to pivot to digital early enough, and the pandemic collectively did them in. Sinclair’s presence as majority owner of Diamond certainly didn’t help matters and probably hastened their demise.

Radio pro sports deals are a lot smaller. I don't recall any teams getting dropped in iHeart or Cumulus bankruptcies.

The White Sox and Bulls both left WLS for different radio homes in the wake of Cumulus’s bankruptcy. But it was the only such rights deal to be nullified for either company (WLS, being a conservatalker, had little incentive to keep the teams).

Play ball! WGN Radio picks up White Sox | Robert Feder

robertfeder.dailyherald.com

 

[bigdonho]

This all sort of reminds me of these two guys that owned a cow jointly. One wanted to keep the cow for the milk it gave. The other wanted to butcher the cow for meat. One week the guy that wanted to keep the cow went to Chicago. When he returned he discover that the cow had been butcherd and the meat was in a freezer. When asked what happend he was told "I killed my half of the cow and your half died."

I guess the bottom line is, it doesen't matter how profitable the groups are. If there is not enough revenue being generated to cover the debt service, what is the future of the company.

 

[TheBigA]

I guess the bottom line is, it doesen't matter how profitable the groups are. If there is not enough revenue being generated to cover the debt service, what is the future of the company.

And yet lenders willingly provide the funding for these deals, only to end up in court a few years later.

It's one thing to look at it from the radio owners, but how about the lenders? It's their money.

 

[Kelly A]

And yet lenders willingly provide the funding for these deals, only to end up in court a few years later.

Although I think most lenders and hedge funds have learned their lesson about lending to traditional media by now.