Cloudburst!

[SirRoxalot]

The stockholders (or at least those who were left holding penny stock shares) take it in the shorts again as Cumulus executes a pre-packaged Chapter 11 bankruptcy.

Cumulus sheds a BILLION dollars in debt, and the secured lenders - who owned about 69% of the company, end up owning the majority of the company after the bankruptcy. Those who held Cumulus bonds won't get any interest payments during he restructuring. What they'll get after the restructuring is up in the air. Essentially, 31% of those who invested in Cumulus get nothing, or a "maybe" somewhere down the road.

If Mary Berner is retained, it could be a good thing for those who work at Cumulus. Revenue - which as increased under her reign - can go toward operations and improvements instead of debt service. I'm sure that the secured lenders will want to see a greater return on their investment - or at least a chance that somebody else might take Cumulus off their hands.

It makes you wonder what the Dickey's got out of it in the end - and whether that $207-million that Lew raised might buy a chunk of the new company from one of the secured lenders who wants out.

 

[TheBigA]

It makes you wonder what the Dickey's got out of it in the end - and whether that $207-million that Lew raised might buy a chunk of the new company from one of the secured lenders who wants out.

My understanding is he had to approve the terms of the deal. His name was not mentioned in any of the reporting I saw. There could be other shoes to drop following this story.

 

[SirRoxalot]

If they're going to shed a BILLION in debt, it's got to come from somewhere. There's about $610-million tied up in Senior Bonds.
It looks like bond holders may be SOL. From the Cumulus website:

How will the Chapter 11 filing affect the value of Cumulus bonds?

It is not possible to predict what value, if any, Cumulus bonds may ultimately have.

Will Cumulus continue to make interest payments on bonds?

We do not expect to pay interest on bonds or interest that will accrue on bonds during the financial restructuring process.

The common stockholders get nothing. The preferred lenders get the company - which really isn't much of a change since the Citadel bankruptcy. The Dickey's are likely secured lenders, but their stake in the combined Citadel-Cumulus was pretty small at the outset. Insiders held only 5.27% of the stock. Even if that's all preferred - and all belongs to the Dickeys, it's a small share of the company.

The only approval they might have needed from the Dickeys was John's vote on the Board of Directors, and he could have been outvoted. Lew and company seem to be more invested in the luxury magazine business than radio at this point.

 

[TheBigA]

The only approval they might have needed from the Dickeys was John's vote on the Board of Directors, and he could have been outvoted. Lew and company seem to be more invested in the luxury magazine business than radio at this point.

Maybe...I thought the Dickeys had "super-voting shares." In any case, according to Inside Radio, the company wasn't able to get everyone to agree, which is why it's not a pre-pack, but rather pre-negotiated. They admit they don't have everyone's approval. They just aren't specific with the names.

 

[SirRoxalot]

It appears that some people left holding the bag are unhappy that it's empty. Some of the bond-holders and institutional share-holders are looking for at least a bone thrown their way. Cumulus is also going to have to work something out with vendors like Nielsen who they'll need going forward. Technically, they may have to write off some current bills as bad debt, but Cumulus is likely going to have to make them whole in the long run.