SRGuide said:
This isn't about money - it's about cultural identity and transborder politics. $14 million is chump change.
$180,000,000 Pesos Mexicanos is not chump change to Grupo Radio Centro, S.A. de C.V., who borrowed it at about 13% interest. It means that GRC has to make the acquisition perform well in a poor U.S. economy and in a poor moment for radio in general.
There is no issue of "cultural identity" as the new station comes to compete on a relatively equal footing with established stations with very similar programming. Any radio station reflects the culture of its audience, whatever the format. So this new one will reflect the tastes and needs of some segment of Los Angleles Hispanics, already served by 12 different offerings.
And there is no issue of "transborder politics" as the deal is patently legal; US firms have been renting Mexican stations going back 70 years, and Mexican stations have been programming to the US along the border as long as radio existed there.
How much did the United States spend on Voice of America, Radio Free Europe and Radio Marti over the years to influence politics of other countries?
Irrelevant. How is a clone of one of GRC's FM formats, totally music-based and devoid of political content, going to be comparable with the news and talk based, agenda driven, content of the VOA or the Radio Martí program?
Regarding the general issue of "foreign" ownership, who really owns Clear Channel and how do we know that? The "Going Private"money was raised by selling bonds. Who bought those bonds? Who owns them now? What are the FCC reporting requirements? What happens if TARP money is used to buy up "toxic" CC bonds and the Federal Government controls Clear Channel and Tim Geithner fires the management?
There are required forms one must fill for all brokerage and related accounts that show citizenship and tax status. Perfect? No... because most areas of commerce have no citizenship requirements.
Bondholders are lenders. They are secured by assets and promises of certain operating ratios. But they do not exert influence on the companies that issued the bonds any more than your mortgage lender tells you how to paint your bedroom or your car lender tells you what speed to go. In a forclosure, which would be relevant only in a Chapter 7 proceeding, a court appointed representative administers and sells the assets to another party. In a Ch. 11 deal, the assets are preserved under court protection untill the company either recovers or goes to liquidation... and in neither case do the secured debt holders own the company.
Corporate radio today is owned by the bondholders - the notion that equity stockholds "own" the company is just a legal fiction. That's why the stock can sell for a few cents, have Billions of dollars of negative equity - yet the bondholders don't force bankruptcy. It's not in their best interest.
Secured lenders have first claim on the sale of assets in a liquidation. Often, in the case of a failing company, the bondholders will take lower interest or less principal to recover something as opposed to forcing a company to liquidate. Equity holders have the lowest security, and are essentially counting on the long term profitability of a company.
Negative equity, as long as a company is paying its obligations, is even to some extent irrelevant. Asset value is only an issue if you sell the asset. If it is producting, you don't sell it. I have a BRIC fund that is off 74%; as long as I don't sell it I have no loss, and if I keep it it may recover in some time. For the moment, I own, through the fund, the same things i owned before the market revalued them.
