Dear Lord no. That ship has long sailed away.
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Audacy Stock today
- Thread starter Oldbloodandguts
- Start date
I was joking. I know that aint happening
That this thread is exploring the financial aspect of broadcasting and media is particularly interesting.
As relates to stock buybacks, I think those posters here who oppose buybacks are specifically referring to companies that have received bailouts from the federal government, that is taxpayer dollars, to buy back stock. Typically, this drives up the share price which also inflates the CEOs and COOs compensation that may be based on the value of the stock. Here's the perspective of Robert Reich, a particularly knowledgeable chap when it comes to economics.
Now, as to "kicking the can down the road;" this is a common ploy that's been used in a number of businesses. However, it may not be the ideal time to make such an "ask." We may be at the dawn of another banking crisis which certainly would not be kind to media businesses in distress.
Read this assessment and take note of the chart just under the second paragraph. Next week, which coincides with Audacy's investor conference call, could be a particularly stressful week for banks and lending institutions. Time will tell, but this may turn into a disturbingly rough road for Audacy.
As relates to stock buybacks, I think those posters here who oppose buybacks are specifically referring to companies that have received bailouts from the federal government, that is taxpayer dollars, to buy back stock. Typically, this drives up the share price which also inflates the CEOs and COOs compensation that may be based on the value of the stock. Here's the perspective of Robert Reich, a particularly knowledgeable chap when it comes to economics.
Now, as to "kicking the can down the road;" this is a common ploy that's been used in a number of businesses. However, it may not be the ideal time to make such an "ask." We may be at the dawn of another banking crisis which certainly would not be kind to media businesses in distress.
Read this assessment and take note of the chart just under the second paragraph. Next week, which coincides with Audacy's investor conference call, could be a particularly stressful week for banks and lending institutions. Time will tell, but this may turn into a disturbingly rough road for Audacy.
To begin with, banks are out of the question here. Traditional investment companies are out of the question. It needs to be someone with deep pockets that doesn't want to get paid back in less than 5 years. Then during that time, they need to build a better system to monetize their content. Because the current system can't sustain as it is.
I don't disagree with this ↑ assessment. However, as the banking sector goes, so goes the individual investor-white knight sector. (I can't help "kah-nigg-ett" from Monty Python and the Holy Grail) From what I have read, investors will be looking for a greater yield than that which might be provided by "saving" Audacy. As it relates to the potential of a white knight coming to the rescue, one can only imagine further cuts, reductions in staff and spin offs at Audacy ... which begs the question, how much remains to be cut and spun? But as Chainsaw Al Dunlap once said, "there's always something left to be cut." Scary thought.
Absolutely, and that's where Audacy Atlas comes in. Asset sales. They will do all the things they'd have to do in a Chap 11 bankruptcy without actually filing the papers. Sell off losing assets, consolidate staff, and get out of bad deals left over from CBS. They have to do the things they said they were going to do when they renamed the company, which is build a company that isn't 100% dependent on radio advertising. They have to do it without creating new debt. That means partnerships.
All of this is fine until Audacy misses a payment on its considerable debt. If that happens, the debt holders will own the company and the Field family will take it in the shorts along with the rest of the stockholders.
As the article I linked says, that won't happen until next year at the earliest, unless they were able to renegotiate it to 2026. Between then and now they need to gain access to some cash, because radio advertising isn't going to grow fast enough to make a half a billion dollars. Unless they double the spotload, and that's not going to happen. That's the reality. They need a second revenue stream. Radio advertising is good, but all it does is meet basic expenses, and even then there are shortfalls.
It appears that Commercial Radio no longer has a viable business model. What is that second revenue stream?
Radio is sort of like the printed Yellow Pages. It's defunct.
Commercial Radio gutted its programming and all that's left is generic cookie cutter content. Maybe going the route of Public listener supported Radio might be an option. The days of saying "Screw you listener-- here's another 10 minute commercial stop set" are over. People have options they didn't have 25 years ago...
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Audacy earlier this quarter amended its Receivables Purchase Agreement with DZ Bank (and other lenders) to lower the minimum liquidity covenant from $75 million to $25 million and to permit a "Going Concern" qualification on the FY 2022 Annual Audited Statements if any such qualification is "expressly solely with respect to, or expressly resulting solely from an upcoming maturity date of any revolving credit facility within one year from the date of such opinion" or expressly solely results from "a potential breach of a leverage ratio of any revolving credit facility."
I would expect the company to continue to seek covenant waivers from its other lenders.
If those other lenders are unwilling to grant such waivers, then the Company will likely have no choice but to file for Chapter 11.
I suspect most lenders / noteholders aren't prepared for Audacy to enter Chapter 11 on a "freefall" (i.e. non-prepackaged) basis and will likely be willing to grant the covenant relief sought for a period of time so long as they continue to receive scheduled debt service during the relief period.
Bear in mind the Revolver and Term B-2 Loan are first lien secured; these two credit facilities plus the receivables purchase facility all mature in 2024. The RPF matures in June or July of 2024, the Revolver matures on August 19, 2024, and the Term B-2 Loan matures ninety days later on November 17, 2024.
There is about $632 million of Term B-2 debt outstanding. The Revolver balance as of September 30, 2022 was $75 million, but that balance could be significantly higher today. It is unclear how much unused drawing capacity remains on the Revolver (the committed amount is $250 million, but the company likely can draw nowhere near that number without tripping its leverage ratio covenant).
My guess is the company, its advisors, and the lenders / noteholders will try to strike a deal later this year that sees some new money committed, a portion of the Term B-2 debt equitized or converted to junior lien debt, and all of the 2027 and 2029 Notes equitized. Existing equity holders will see their existing interests severely diluted. Perhaps preferred treatment relative to existing claims will be granted to parties wiling to contribute new money capital. The above concept would likely be instituted via a prepackaged BK filing where restructuring support agreements are presented to the judge as part of first day motions.
I would expect the company to continue to seek covenant waivers from its other lenders.
If those other lenders are unwilling to grant such waivers, then the Company will likely have no choice but to file for Chapter 11.
I suspect most lenders / noteholders aren't prepared for Audacy to enter Chapter 11 on a "freefall" (i.e. non-prepackaged) basis and will likely be willing to grant the covenant relief sought for a period of time so long as they continue to receive scheduled debt service during the relief period.
Bear in mind the Revolver and Term B-2 Loan are first lien secured; these two credit facilities plus the receivables purchase facility all mature in 2024. The RPF matures in June or July of 2024, the Revolver matures on August 19, 2024, and the Term B-2 Loan matures ninety days later on November 17, 2024.
There is about $632 million of Term B-2 debt outstanding. The Revolver balance as of September 30, 2022 was $75 million, but that balance could be significantly higher today. It is unclear how much unused drawing capacity remains on the Revolver (the committed amount is $250 million, but the company likely can draw nowhere near that number without tripping its leverage ratio covenant).
My guess is the company, its advisors, and the lenders / noteholders will try to strike a deal later this year that sees some new money committed, a portion of the Term B-2 debt equitized or converted to junior lien debt, and all of the 2027 and 2029 Notes equitized. Existing equity holders will see their existing interests severely diluted. Perhaps preferred treatment relative to existing claims will be granted to parties wiling to contribute new money capital. The above concept would likely be instituted via a prepackaged BK filing where restructuring support agreements are presented to the judge as part of first day motions.
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For Townsquare, it's digital. Cumulus seems to be focusing on podcasts and syndication. Audacy is dipping it's toes into both, but they're late to the party.
The business model is always changing. Audacy bought these stations before covid. Then the post-covid recession hit. There has been no chance for Audacy to replenish its coffers. Plus you have 7% inflation driving up operating costs. If the only revenue stream is on-air advertising, and you hit a period like now where the advertising has dried up, then what?
This is not a programming issue. It won't be fixed by flipping formats or hiring more local DJs. None of that will get them the half billion they need.
Townsquare, which registered impressive 2022 numbers last week, has made radio part of an ad and marketing package for local merchants and service providers. They have radio ads, web presence including an actual client website they administer and targeted ads via emails and online insertions all in one package.
No, it's not. America is a rather uniform nation due to national TV, the internet and common peer group cultures. So in every market, big or small, there will be mostly the same array of radio formats playing the same songs.
Only certain groups, mostly older, will do that. The K-Love folks tried a pop/hit CHR kind of Christian format with Air1 and it never got enough support due to the lack of financing from actual listeners.
I am a monthly supporter of a food bank here in the Coachella Valley and I was chatting with one of the administrators about this topic and was told that most of their contributors are over 50... even more over 60. The younger people, I was told, tend to react to "shiny objects" like GoFundMe but don't do regular contributions for things like the homeless, food bank and other community campaigns.
Yet just under 90% of people over 18 use radio every week. You have to start moderating your negativity based on reality: yes, radio is in a gradual decline but it is a very efficient way to reach huge percentages of the population at reasonable costs.
In terms of ad revenue, I'd contend the decline is something more than "gradual."
Many listeners change the station as soon as commercials begin to play. There are other methods of advertising that are considered less obtrusive. As you duly noted, Townsquare is taking advantage of some of those methods.
Reality right now is that Audacy stock is 15 cents a share and the company is not viable. The merge with CBS made things worse. What you describe as "gradual decline" means growth is no longer possible. Investors know that...
Those two things have nothing to do with each other.
Sure it does. It's just not viable for the massive conglomerates who think they have to own everything for the sake of "growth" and take on billions in debt to do it with no way to pay back that much principal and mounting interest.
It's no different than the individual who buys more house than they can afford, or racks up more credit card debt than they can pay. It doesn't necessarily mean they don't have a viable income, it just means they didn't make sensible financial decisions.
Phew! That's some serious reading. Thanks for posting. Conditions to Effectiveness 3(a) seems to be telling (to this lay person's reading.)
Regarding the paragraph marked *** in the quote box, it appears this is where/why Audacy Atlas is intended to contribute to reducing the company's debt. It's a serious challenge, wholly dependent on the timing of when property and/or properties are sold. Is it a buyer's market or seller's market kind of thing.
As a sidebar, Item 11 is significant, stipulating that this agreement is governed by the laws of the State of New York. NY, home of the major exchanges, has some of the most stringent financial regulations in the USA.
Based on operations, the company has strong EBITDA cash flow. Its problem is its debt, not its radio stations.
If you order a quarter-pounder and try to swallow it whole and choke to death, the problem is not the hamburger, it is how you used the burger. The customer is at fault, not the restaurant.
In this case, the stations are fine. The Field family tried to swallow CBS whole, without the ability to do so. They are now choking on the debt.
All of the assets transferred to Audacy Atlas *maybe* on a good day are capable of commanding $150 million in proceeds in aggregate (most of that would come from tower site sale-leasebacks) ?
I'm taking a total stab in the dark on that number.
While that might give the company room some wiggle room from either a liquidity or lender appeasement vantage point, that doesn't strike me as a number sufficient to resolve the company's financial ailments on a long-term basis.
It could serve as a component of a broader, more comprehensive strategy, though.
I'm taking a total stab in the dark on that number.
While that might give the company room some wiggle room from either a liquidity or lender appeasement vantage point, that doesn't strike me as a number sufficient to resolve the company's financial ailments on a long-term basis.
It could serve as a component of a broader, more comprehensive strategy, though.
The same thing happened when Citadel bought ABC Radio and then Cumulus bought Citadel. The problem there was that Citadel's bankruptcy didn't address the core issues with ABC. So when Cumulus bought the whole package, there were still some hidden bombs. They didn't get cleared out until after the Cumulus bankruptcy.
The lesson here is that a radio only company simply can't handle the debt and associated costs that come from buying a group of radio stations that was originally part of a TV company. The operating budgets at CBS were different than Entercom. Salaries, benefits, leases, anything you can think of are bigger at a TV company. I also think this "reverse morris trust" thing is a bad idea, especially when the selling company's stockholders immediately sell their shares of the new company.
Had a radio company bought the Cox radio stations, rather than Apollo buying both radio & TV, we'd likely see the same thing.
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