Audacy Stock Trading Halted

[PTBoardOp94]

So you vote for bankruptcy?

A bankruptcy is baked in at this point. The only way out is the scenario David outlined, where the company and its creditors arrive at an agreement to extend maturity dates, reduce principal on the debts, and provide short-term liquidity.

Going private would provide no aid in that effort, unless the buyer is willing to provide a cash injection as part of the buyout.

 

[TheBigA]

Going private would provide no aid in that effort, unless the buyer is willing to provide a cash injection as part of the buyout.

Read my post #129 in this thread. At no time have I said going private would help with the debt. Anything the company does will cost more money. That's why investors are walking away. Renegotiating the debt now will cost more because interest rates are higher, and any negotiation will change the rate. If investors don't like the stock now, they're really not going to like it when they see what comes next. That's why I say take it off the market. It's only going lower.

 

[Deleted User]

So you vote for bankruptcy?

They're not going to "junk" 400 stations that still make money. Anything they do will cost money.

There will come a time when debt service is payable, and they will not have the money to pay it.

On paper the company is worth less than 10 Million, that is less than what they got for selling WAAF to EMF.

They are not making money, they are showing losses every quarter, or maybe a ever so slight profit, but not nearly enough to turn things around in our lifetimes without blowing the company up in some way shape or form

So lets assume they are not going to be able to turn things around by making more money

The institutions that are holding paper will be the driving force as for what happens.

When Audacy can't make the payments, the creditors can either re-write the notes extending the time for repayment hoping that at some point the cash flow will be better,or they can force the company into bankruptcy

Then it comes down to "we've had enough, blow the place up, let us take our capital losses on paper so we can offset profits we made somewhere else for tax purposes as we write the investment off", or option 2, "hey guess what we are never going to get paid in cash but all of us creditors just became owners of a radio company" with the Fields family and other individual stockholders like management having their shares valued at zero

I don't know about you but I wouldn't want to own the stations, but they do have some value it is just a matter of finding buyers for them, remembering that there are limits on the number of stations you can own in a market and the percentage of revenue they can make in a market.

What do you think is going to happen?

 

[exdjted]

I don't know about you but I wouldn't want to own the stations, but they do have some value it is just a matter of finding buyers for them, remembering that there are limits on the number of stations you can own in a market and the percentage of revenue they can make in a market.

What do you think is going to happen?

Unless the FCC changes the ownership caps within the next 12 months, there is NO white knight riding in to rescue Audacy, and there simply aren't buyers willing to pay cash in any significant deals that will help. Who is making big cash deals in today's market? Nobody.

If I had $2 billion burning a hole in my wallet, why would I buy a failing Radio company when I could buy a stake in an NFL franchise and practically guarantee myself a profit down the road?

Even if they sell off 1 or 2 stations at a time, all that does is weaken the cluster they're poaching from. Also, aren't the tax implications from the CBS stations that makes them the last ones to sell, even though it was the CBS deal that created this monster? I could probably get a deal done for some of the original Entercom stations pushed through with David Field before he'd even entertain an offer on the CBS stations.

 

[RadioGuy1864]

Who is making big cash deals in today's market? Nobody.

Just EMF and a couple smaller religious groups. And even EMF has it's limits, they can't buy everything in sight. Every station sale reduces cash flow, so Audacy can't sell their way out of this.

 

[TheBigA]

On paper the company is worth less than 10 Million, that is less than what they got for selling WAAF to EMF.

That number is based on stock price, not actual asset value. They own property alone that's worth more than $10 million. City Island in NYC where two of their towers are based is worth $70 million or more. That's another reason why they should get out of the stock market. The only reason to be in the stock market is to raise money, and you can't do that at 5 cents a share,

What do you think is going to happen?

I think I've already laid out the options. They need an equity partner with deep pockets. Someone like Apollo Global or John Malone.

Unless the FCC changes the ownership caps within the next 12 months, there is NO white knight riding in to rescue Audacy,

I agree, and unless the caps are changed, you will continue to see commercial stations sold to religious organizations, because they're the only ones with money. The bad news is the democrats are historically against increasing the caps. So no changes for a while.

 

[secondchoice]

What this will eventually come down to is do the holders of Audacy debt want to take the write downs (haircuts) when the next big payment is due or do they kick the can down the road rework the debt and hope for some kind of improvement in revenue in the future.

IMHO The two-billion-dollar question is: can whoever is running the company in the future come up with compelling content that can be monetized? Or will management just “squeeze” the current stations until there is nothing left. The cost of entry into the “internet delivery” is low and can be “copied” easily so whoever really wants to succeed in that space alone had better be really creative. Cash wise the stations could cover the cost of talent giving the app “free” content”.

 

[TheBigA]

IMHO The two-billion-dollar question is: can whoever is running the company in the future come up with compelling content that can be monetized?

The problem isn't the content. The problem is the business model is based on :30 spots, and listeners don't want :30 spots. Add the fact that competition for advertisers is driving down spot price. So they can't increase the spot price or increase the number of spots. Meanwhile costs are increasing. As long as that's the situation, the only thing they can do is cut costs, because they can't increase revenue.

They need another revenue stream, because the current one is maxed out. TV stations have retransmission fees, but it's not practical for radio. They thought HD Radio might be a new revenue stream, but so far, no.

 

[tbolt909]

The problem isn't the content. The problem is the business model is based on :30 spots, and listeners don't want :30 spots. Add the fact that competition for advertisers is driving down spot price. So they can't increase the spot price or increase the number of spots. Meanwhile costs are increasing. As long as that's the situation, the only thing they can do is cut costs, because they can't increase revenue.

They need another revenue stream, because the current one is maxed out. TV stations have retransmission fees, but it's not practical for radio. They thought HD Radio might be a new revenue stream, but so far, no.

What your saying is that the business model is broken and antiquated. Field knew this when they merged with CBS.
Others enabled this deal creating a mountain of debt. It sounds similar to the Bernie Madoff scheme.

It's obviously true that Radio has competition they didn't have 25 years ago. Still, much of the misery they now face is self inflicted. They can't cut their way to prosperity and investors know that...

 

[TheBigA]

Field knew this when they merged with CBS.

Not true. At the time, Entercom was one of the more successful radio companies, with it's stock trading in the teens. The model as he knew it was working for his company. The only other option for Moonves was spinning off CBS Radio into its own company with $2 billion in debt. They would be in the exact same place now.

Entercom and the lenders worked out a payment plan based on the realities at the time. Then things changed.

Still, much of the misery they now face is self inflicted.

Really? So radio companies created the pandemic? Call Dr. Fauci right now. Blame radio for the failures of all the other companies that are struggling and laying off staff.

 

[Deus Ex Machiato]

It's obviously true that Radio has competition they didn't have 25 years ago. Still, much of the misery they now face is self inflicted. They can't cut their way to prosperity and investors know that...

It's not so much a self-inflicted wound as it is ignoring a problem until it becomes too big to fix. It is somewhat analogous to the record industry's response to online music. At first they just sued Napster and individuals who were doing file sharing rather than realizing that the days of $15 CDs were coming to an end.

Some radio companies still don't get it. iHeart seems to have adapted. Their on-air signals are still there, but they're shifting to streaming content. In fact if you do a Google search for iHeart, the description is "Listen to your favorite music, podcasts, and radio..." Notice which one is last?

They teetered on the edge of bankruptcy for quite some time, got taken over by venture capitalists, (then there was this little worldwide economic catastrophe), and eventually they did file for Chapter 11.
Is Audacy going down the same road?

 

[tbolt909]

Really? So radio companies created the pandemic? Call Dr. Fauci right now. Blame radio for the failures of all the other companies that are struggling and laying off staff.

It's bogus to blame it all on the Pandemic. Radio has been cutting jobs for 30 years. 2008 saw a recession. The Pandemic affected the World. Some companies are laying off employees and yet others cannot find anyone to hire. The Hotel and restaurant industry are struggling to find staff. Yes, the Pandemic changed many things. Radio had problems long before it. (See Cumulus and Clear Channel)...

 

[TheBigA]

It's bogus to blame it all on the Pandemic. Radio has been cutting jobs for 30 years.

Read the first half of my post. Before the pandemic, Entercom was a big success, and was not a company that cut local staff.

 

[tbolt909]

Read the first half of my post. Before the pandemic, Entercom was a big success, and was not a company that cut local staff.

I know plenty of people that Entercom terminated/ downsized before the Pandemic (and before the CBS merge). Even without the Pandemic, the CBS deal was bringing massive debt. Audacy would be better off having never made those acquisitions. At least they would still be somewhat viable...

 

[TheBigA]

Even without the Pandemic, the CBS deal was bringing massive debt.

Entercom stock was just fine until the pandemic. And the debt was the same then as it is now.

 

[Deus Ex Machiato]

It's bogus to blame it all on the Pandemic.

FYI, just at the Entercom cluster where I was, the layoffs began in late 2018 and early 2019. I was one of the first. The local HR director who helped me clean out my office was gone a couple months later. Then the local digital content guy. Then the long-time classic hits morning show. Then the very long time local midday host/MD on that station. The country morning show was split up with one going to cover the classic hits mornings and the other one out, the country midday/APD/MD, and afternoon host. The local controller, and I'm sure I'm missing a few, but these were all before the pandemic.

IIRC the people laid off during the pandemic were the local research director, the local VP of programming, the afternoon host/APD on the classic hits station, and I'm sure there were a few others but the stations had already been pretty well gutted already.

 

[TheBigA]

FYI, just at the Entercom cluster where I was, the layoffs began in late 2018 and early 2019.

Keep in mind the 'Entercom cluster' where you were was a CBS cluster. One that had been for sale by CBS several years before the Entercom merger. It wasn't co-owned with TV, so there was no synergy with anyone, except maybe Metro Traffic. Once that group was sold to iHeart, the cluster was very inefficient. If there had been real buyers, the cluster would have been sold. My point is I wouldn't blame what happened on Entercom.

 

[Rusty Muck]

It's bogus to blame it all on the Pandemic. Radio has been cutting jobs for 30 years. 2008 saw a recession. The Pandemic affected the World. Some companies are laying off employees and yet others cannot find anyone to hire. The Hotel and restaurant industry are struggling to find staff. Yes, the Pandemic changed many things. Radio had problems long before it. (See Cumulus and Clear Channel)...

iHeart made massive cuts to their employee roster two months before the pandemic. Chances are Audacy would have wound up in this same exact position no matter what happened, Covid merely provided a small nudge.

 

[Deus Ex Machiato]

Keep in mind the 'Entercom cluster' where you were was a CBS cluster. One that had been for sale by CBS several years before the Entercom merger. It wasn't co-owned with TV, so there was no synergy with anyone, except maybe Metro Traffic. Once that group was sold to iHeart, the cluster was very inefficient. If there had been real buyers, the cluster would have been sold. My point is I wouldn't blame what happened on Entercom.

Yes, it was CBS for a long time. When Entercom took over, a lot of people were worried, but they actually came in and made some positive changes. We all breathed a sigh of relief and thought that maybe the axe wouldn't fall.

Yet after about a year, fall it did, and it baffles me how you can think the blame for the pre-pandemic layoffs falls on anyone but Entercom.

 

[davideduardo]

They are not making money, they are showing losses every quarter, or maybe a ever so slight profit, but not nearly enough to turn things around in our lifetimes without blowing the company up in some way shape or form

On an EBITDA basis, except for the terrible Q1 of this year, they have had profits of well over $100 million in past years.

The institutions that are holding paper will be the driving force as for what happens.

And they don't want to own a group of radio stations. They want to recover their capital. So what is most likely is what has happened in may other troubled company situations: they take a haircut and reduce the debt and extend the terms. It's either that or a combination of that and taking some equity in order to get payback on the remaining debt with a possibility of a sale of the equity later.

Whichever option best preserves the current EBITDA is going to be selected. The problem is debt, not radio.

When Audacy can't make the payments, the creditors can either re-write the notes extending the time for repayment hoping that at some point the cash flow will be better,or they can force the company into bankruptcy

Or they accept a debt reduction or a debt reduction / partial equity as I just detailed.

A pure bankruptcy is the least attractive option as the lenders recover next to nothing unless it, like the iHeart situation years ago, preserves the company and its operations.