I know he's long gone, but as we used to say, back in the day, in Toledo...
"Dickey Lew, before Lew can dickey you"
"Dickey Lew, before Lew can dickey you"
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Cumulus files for bankruptcy again
- Thread starter BoboKnight
- Start date
Cue up those prepaid weekend infomercials!
Among the leases Cumulus wants to reject is for its New York City offices on Vessey Street. At one time, Cumulus had offices in several places around the city, including Madison Square Garden. A few years ago they consolidated a lot of those offices in a new space downtown. Cumulus no longer operates any radio stations in NYC, and all of their studio operations have moved to other locations. But they likely still need a NY sales office, and an office for Mary Berner. That assumes she'll stay with the company after the bankruptcy closes.
More reporting on what comes next. This story says they've arranged for another loan for up to $100 million to cover expenses related to the bankruptcy. So while they're eliminating past debt, they're also creating some NEW debt:
www.insideradio.com
Post-Restructuring, Cumulus Media Will Focus On Growth And Flexibility.
Cumulus Media plans to emerge from Chapter 11 with a dramatically reduced debt load, lowered interest costs, and a clean balance sheet that will give the company significant financial and
They'll likely only use a small portion of that $100 million line of credit during the actual bankruptcy. That same $100 million line of credit will remain in effect upon emergence and will become an obligation of Reorganized Cumulus.
I'll try to pull up the Disclosure Statement online this weekend to see what each voting class of claims is proposed to receive under the Plan of Reorganization.
I'll try to pull up the Disclosure Statement online this weekend to see what each voting class of claims is proposed to receive under the Plan of Reorganization.
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Here is the online case docket:
The above is a free website available to the general public.
Here is the direct URL for the Disclosure Statement:
At time of filing, per page 346 of the Disclosure Statement PDF, there were:
Per the proposed Treatment of Claims and Interests:
Class 3 is proposed to receive:
- A dollar-for-dollar exchange of of prepetition ABL Loans for "New ABL Loans." Without getting into too much technical & legal jargon, the Plan is set up in a way that ensures a seamless transition of ABL Facility borrowings & borrowing availability from pre-petition, to during the Bankruptcy proceedings, to emergence from Bankruptcy. Upon emergence, the ABL Facility will mature March 1, 2029 and its commitment limit will increase from $100 million to $125 million.
Class 4 (representing prepetition loan balances of $168.6 million) is proposed to receive the following in exchange for extinguishment of prepetition claims:
- Exit Convertible Notes (totaling $50 million), and
- The 2029 Secured Claims Equity Distribution, which consists of 95% of the Common Stock in Reorganized Cumulus, subject to FCC approval for transfer of licenses from Old Cumulus to Reorganized Cumulus.
- The granted consideration is said to be equal to 96.5% of discharged claims. Bear in mind that recovery percentages hinge on an accurate valuation of day #1 equity in Reorganized Cumulus. There is zero guarantee business valuation assumptions or conclusions are accurate; it is simply the nature of the beast. Therefore, the recovery ratio should be taken with a gigantic grain of salt.
Class 5 (representing prepetition loan balances of $494.5 million) is proposed to receive the following in exchange for extinguishment of prepetition claims:
- The Other Funded Debt Claims Equity Distribution, which consists of 5% of the Common Stock in Reorganized Cumulus, subject to FCC approval for transfer of licenses from Old Cumulus to Reorganized Cumulus.
- The granted consideration is said to be equal to 1.2% of discharged claims. So, holders of Class 5 Claims are expected to suffer a very large loss on those Claims.
Projected recovery on Class 4 & Class 5 claims on a combined basis = 25.4% of prepetition Class 4 & Class 5 claims. That means for every $1.00 of prepetition debt under Class 4 & Class 5 that gets discharged, stock and/or convertible notes with a projected worth $0.254 will be issued.
Classes 6 through 9 consist of general unsecured claims, intercompany claims & interests, and existing equity interests.
- General unsecured claims consist of vendor payments, utility bills, payroll, and the like. For a company reorganizing in Chapter 11, any prepetition amounts are generally paid as part of normal course of business. Any such prepetition claims not paid during Bankruptcy are often reinstated onto the balance sheet of the Reorganized company.
- Intercompany claims & interests are either reinstated or extinguished depending on business need. These generally have no bearing on overall Estate value available to external claim holders.
- Existing Equity Interests (Class 9 under the Plan) are proposed to receive absolutely nothing of value under the Plan. They are proposed to suffer a complete loss.
So, there ya have it in a nutshell. For folks who geek out on this stuff like I do, hopefully you found the above summary to be worthy of your time.
The above is a free website available to the general public.
Here is the direct URL for the Disclosure Statement:
At time of filing, per page 346 of the Disclosure Statement PDF, there were:
- $55.2 million in loan balances + $5.0 million in unfunded letters of credit outstanding under the pre-petition ABL Facility (collectively, the "ABL Facility Claims"),
- $321.0 million in 2029 Term Loans owed (the "2029 Term Loan Claims"), and
- $317.9 million in 2029 8.00% senior secured first-lien notes owed (the "2029 Notes Claims").
Per the proposed Treatment of Claims and Interests:
- The full ABL Facility Claims amount shall be treated as "Allowed" claims (i.e. eligible to receive the economic treatment offered to Class 3).
- Only $168,579,947 (about 26.4%) of the 2029 Secured Claims shall be treated as "Allowed" claims (i.e. eligible to receive the economic treatment offered to Class 4).
- The remainder of 2029 Secured Claims (about $470.32 million) will be lumped into Class 5 ("Other Funded Debt Claims") along with holders of the 2026 Debt Claims (consisting of 2026 Notes where $22,965,108 in principal is outstanding and 2026 Term Loans where $1,227,363 in principals is outstanding). So, altogether, Class 5 constitutes about $494.5 million in outstanding debt (before counting accrued and unpaid interest and fees).
Class 3 is proposed to receive:
- A dollar-for-dollar exchange of of prepetition ABL Loans for "New ABL Loans." Without getting into too much technical & legal jargon, the Plan is set up in a way that ensures a seamless transition of ABL Facility borrowings & borrowing availability from pre-petition, to during the Bankruptcy proceedings, to emergence from Bankruptcy. Upon emergence, the ABL Facility will mature March 1, 2029 and its commitment limit will increase from $100 million to $125 million.
Class 4 (representing prepetition loan balances of $168.6 million) is proposed to receive the following in exchange for extinguishment of prepetition claims:
- Exit Convertible Notes (totaling $50 million), and
- The 2029 Secured Claims Equity Distribution, which consists of 95% of the Common Stock in Reorganized Cumulus, subject to FCC approval for transfer of licenses from Old Cumulus to Reorganized Cumulus.
- The granted consideration is said to be equal to 96.5% of discharged claims. Bear in mind that recovery percentages hinge on an accurate valuation of day #1 equity in Reorganized Cumulus. There is zero guarantee business valuation assumptions or conclusions are accurate; it is simply the nature of the beast. Therefore, the recovery ratio should be taken with a gigantic grain of salt.
Class 5 (representing prepetition loan balances of $494.5 million) is proposed to receive the following in exchange for extinguishment of prepetition claims:
- The Other Funded Debt Claims Equity Distribution, which consists of 5% of the Common Stock in Reorganized Cumulus, subject to FCC approval for transfer of licenses from Old Cumulus to Reorganized Cumulus.
- The granted consideration is said to be equal to 1.2% of discharged claims. So, holders of Class 5 Claims are expected to suffer a very large loss on those Claims.
Projected recovery on Class 4 & Class 5 claims on a combined basis = 25.4% of prepetition Class 4 & Class 5 claims. That means for every $1.00 of prepetition debt under Class 4 & Class 5 that gets discharged, stock and/or convertible notes with a projected worth $0.254 will be issued.
Classes 6 through 9 consist of general unsecured claims, intercompany claims & interests, and existing equity interests.
- General unsecured claims consist of vendor payments, utility bills, payroll, and the like. For a company reorganizing in Chapter 11, any prepetition amounts are generally paid as part of normal course of business. Any such prepetition claims not paid during Bankruptcy are often reinstated onto the balance sheet of the Reorganized company.
- Intercompany claims & interests are either reinstated or extinguished depending on business need. These generally have no bearing on overall Estate value available to external claim holders.
- Existing Equity Interests (Class 9 under the Plan) are proposed to receive absolutely nothing of value under the Plan. They are proposed to suffer a complete loss.
So, there ya have it in a nutshell. For folks who geek out on this stuff like I do, hopefully you found the above summary to be worthy of your time.
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Thanks for finding and posting this.Here is the online case docket:
So, there ya have it in a nutshell. For folks who geek out on this stuff like I do, hopefully you found the above summary to be worthy of your time.
K.M. Richards
Program Director, The Eighties Channel™
Excuse me while I take a couple of Excedrin after plowing through that.
Of course, I am not surprised at the depth of the explanation (which is only part of the overall Chapter 11 filing!). The larger the entity, the more complicated the documentation. I went through a personal bankruptcy in the mid-1980s due to the failure of a non-broadcast business I owned a significant percentage of, and even as an individual, in that earlier time, the filing was a few dozen pages!
Of course, I am not surprised at the depth of the explanation (which is only part of the overall Chapter 11 filing!). The larger the entity, the more complicated the documentation. I went through a personal bankruptcy in the mid-1980s due to the failure of a non-broadcast business I owned a significant percentage of, and even as an individual, in that earlier time, the filing was a few dozen pages!
Pages 17 & 18 of the Disclosure Statement explain why small balances of 2026 Notes / 2026 Term Debt are outstanding. These are basically claims belonging to parties who opted not to participate in the 2024 Debt Exchange via which maturing instruments were extended to 2029. The vast majority of holders of the debt instruments with 2026 maturities elected in 2024 to exchange that debt for new debt maturing in 2029, thereby leaving only small stub balances. The holders of debt instruments with 2026 maturities who opted not to participate were a very small minority.
The 2026 Term Loans ($1.2 million) are secured but the 2026 Notes (just shy of $23 million) are unsecured. Despite this difference, they are both lumped into Class 5. I thought I saw in the filing that the lien priority of the 2029 Notes & 2029 Term Debt ranks ahead of the 2026 Term Loans, which is why Cumulus' professional advisors feel it is appropriate to lump the 2026 Term Loan claims into Class 5. Stated differently, holders of Class 5 claims are lucky they are being offered anything at all of value.
Pages 23 through 29 of the 355 page Disclosure Statement give a general overview of the company's business.
Pages 17 through 19, the Introduction, provide a nice executive-style summary of why Bankruptcy remedies are being pursued.
K.M. makes a great point regarding complexity and expense. The law firms named on the front page of the filing are high priced, prominent firms. It appears each firm has five attorneys working extensively on this matter. Figure $2,000+ per hour in billing for any senior partner. Lower ranking attorneys might still bill upwards of $1,000 per hour. Bear in mind those ten lawyers who are named work only on behalf of Cumulus. In addition, there are investment bankers (Moelis) and financial advisors (Alvarez & Marsal) working on behalf of Cumulus who will also need to be paid.
From page 18:
The 2026 Term Loans ($1.2 million) are secured but the 2026 Notes (just shy of $23 million) are unsecured. Despite this difference, they are both lumped into Class 5. I thought I saw in the filing that the lien priority of the 2029 Notes & 2029 Term Debt ranks ahead of the 2026 Term Loans, which is why Cumulus' professional advisors feel it is appropriate to lump the 2026 Term Loan claims into Class 5. Stated differently, holders of Class 5 claims are lucky they are being offered anything at all of value.
Pages 23 through 29 of the 355 page Disclosure Statement give a general overview of the company's business.
Pages 17 through 19, the Introduction, provide a nice executive-style summary of why Bankruptcy remedies are being pursued.
K.M. makes a great point regarding complexity and expense. The law firms named on the front page of the filing are high priced, prominent firms. It appears each firm has five attorneys working extensively on this matter. Figure $2,000+ per hour in billing for any senior partner. Lower ranking attorneys might still bill upwards of $1,000 per hour. Bear in mind those ten lawyers who are named work only on behalf of Cumulus. In addition, there are investment bankers (Moelis) and financial advisors (Alvarez & Marsal) working on behalf of Cumulus who will also need to be paid.
From page 18:
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This article reports that a judge has approved the Cumulus bankruptcy plan. But it will need FCC approval because there are changes in ownership among the various creditors:
www.insideradio.com
This article says that Cumulus will have a new board of directors, who will have the power to replace the CEO.
radioink.com
Creditors Will Face FCC Scrutiny In Cumulus Bankruptcy Plan.
A bankruptcy judge has approved procedures to ensure Cumulus Media’s Chapter 11 restructuring complies with FCC ownership rules as lenders prepare to receive equity in the reorganized broadcaster. Creditors will
This article says that Cumulus will have a new board of directors, who will have the power to replace the CEO.
Cumulus Media To Go Private, Flush Board Upon Chapter 11 Exit - Radio Ink
The Cumulus Media prepackaged Chapter 11 plan would take the broadcaster private, wipe out current shareholders, install a new board, and hand control to lenders.
radioink.com
Will the creditors/ owners start selling assets in an attempt to quickly get some cash (scorched earth) or will they look more than a year or two ahead with the positive cash flow the company will generate have without debt?
If quick cash is the goal, they could sell the entire company. It might be more attractive without any debt.
I doubt anybody is interested in holding this long term. They've already held it long enough.
To who/which group?
Who knows? Maybe the Saudi government. They seem to be in buy mode.
K.M. Richards
Program Director, The Eighties Channel™
And with that nutcase Carr in charge, a foreign ownership waiver should be only a matter of a filled brown envelope sent to his home.
I continue to wonder how much Cumulus' standalone KRBE here in Houston would fetch, were it to be put on the block for the highest bidder. Full market Class C signal from the market's key tower farm. Longtime successful format but would still be a prize if sold as a stick.
I think we need a larger view for potential media buyers. The domestic money is very limited. And then when we look at the PSKY offer for WBD, we see they're receiving investment from the Saudis and a Chinese company called Tencent. We also saw a deal made with the Chinese for TikTok. So there are people in other countries who want to invest here, at a time when out investment companies are still reeling from the previous bankruptcies.
Whatever it is, it wouldn't be anywhere near enough to pay off the hundreds of millions of dollars that have been lost. A stand-alone station is Market 5 might be worth $10 million or so. The only companies that might buy it are already limited by existing ownership rules. So until something changes there, we likely won't see any single station sales like that.
We've noted that Cumulus wants to get out of its NYC office lease. They also have corporate offices in Atlanta and Houston. A lot of their back-office operations are done in Houston. So I doubt they're in a rush to exit that market unless it's part of another deal.
All of the group owners in Houston outside of Radio One have cap space, and KRBE would be an excellent fit for any of them. Whether they have any capital for such a purchase is another question.
I'm sure both K-Love Inc. and Hope Media Group wouldn't mind upgrading their Houston signals or adding/shuffling formats. I imagine "104.1 KSBJ" has been fantasized about already.
If and when there is a change in maximum ownership rules at the Commission, I believe that there will be a lot of trading... more than straight cash purchases.
The lack of any desire to spend cash may be why KRBE... just like Emmis' stray FM in New York City... have not gotten buyers.
KRBE as a stand-alone with no cluster could be traded for one or more stations in markets where another owner wants to add to their cluster. The exchange would be for a station or two in Cumulus' stronger markets where they can gain greater dominance.