Here comes Audacy Atlas...

[TheBigA]

That's not how the sources and uses of the debt issuance worked in this instance. CBS Corporation received cash from the parties who bought the debt. More specifically, CBS Radio as issuer conveyed the cash it received from the private debt placement to CBS Corporation.

The original plan was to spin off CBS Radio as its own company. So CBS set up an IPO for CBS Radio before Entercom or anyone else was involved:

CBS Corp. to Spin Off Radio Unit

CBS Radio operates 117 radio stations in 26 markets, including New York and Los Angeles.

www.hollywoodreporter.com

The spin off idea came in July. Entercom entered the picture a few months later.

 

[TheBigA]

Remember, CBS left Buffalo long ago when they sold to Townsquare. .

CBS sold to Regent, and they went bankrupt, and Townsquare bought Regent out of bankruptcy.

 

[Kent]

Again, thanks for the explanation. I've read descriptions on the Reverse Morris procedure and never quite "got" how CBS employed it to their advantage. So, really, what happened is that CBS used its name to get financing that the pseudo-buyer might not have gotten or gotten so advantageously and then passed that debt on to the Entercom. I think I get the procedure and the logic for this specific transaction now.

I was wondering about that, too, since Reverse Morris Trusts are typically cash free stock-for-stock deals. Of course, as the target actually takes over the acquirer, the shareholders are simultaneously voting to boot the management of the target.

I also understand most of those stock transactions have schedules that say when the officers can sell their stock in the new company. I understand a lot of Reverse Morris Trusts require the officers of the target to sell shortly after closing, thus assuring they will be compensated in the deal and for the loss of their jobs. Mark probably could explain better than I could.

I remember when Cumulus bought a cluster where I used to work in a cash/stock transaction. The owners of the local cluster didn't get as much as they had originally hoped because they weren't allowed to sell all of their stock immediately, and Cumulus stock subsequently went down. I hope they got rid of their Cumulus stock before it became worthless.

 

[MarkW]

Here is a good explainer, which does a much better job than what I'd be capable of providing:

Reverse Morris Trust (RMT) - Financial Edge

A Reverse Morris Trust transaction is a form of divestiture that combines a spin-off or split-off with a merger. Whilst it is a complicated structure, it is a tax efficient way of divesting a business. It has to be noted that this structure is completed under US tax laws.

www.fe.training

More info:

The Number CBS Radio Watches Most: Entercom Share Price.

The issue of Entercom’s declining stock price is on the table at CBS Corp. as the company continues to press ahead with plans to spin off its radio division into

www.insideradio.com

Selling CBS Corp. shareholders did receive a big slug of stock in Entercom. That was necessary to make this a tax-free transaction from the vantage point of CBS Corp.

All or nearly all of those shares have since been divested.

Following my reading of the explainer to which I linked above, BigA is correct that Entercom was almost certainly known to be the suitor when CBS Radio's private debt offering was announced.

 

[TheBigA]

Selling CBS Corp. shareholders did receive a big slug of stock in Entercom. That was necessary to make this a tax-free transaction from the vantage point of CBS Corp. All or nearly all of those shares have since been divested.

When you look at Entercom stock price over the past five years, it's all downhill. So if all shares held by CBS have been sold, and new buyers of those shares have not materialized, then it's pretty obvious why the stock price is so low, and it's doubtful that anything the company can do will revive interest. Other than take on a new partner with deep pockets.

Couple this with very bad 4th quarter news, and we can all anticipate what we'll hear during the earnings call. Here is a link to today's Cumulus 4th quarter numbers, which were down significantly from 2021. It wasn't long ago that radio companies relied on strong 4th quarters to help them get through the next year's first quarter. So that may explain why Audacy is looking at asset sales as their only way to meet expenses:

Radio Industry News, New Music, Music Promotion, Radio Station Song Charts

All Access offers the latest radio industry news and music news, music promotions for record companies new music, radio station song charts, and much more. AllAccess.com has been serving the radio and music industry since 1995, always bringing you the highest quality content with...

www.allaccess.com

The fact that even NPR is in a situation where they're laying off 10% of their staff tells me that this isn't going to be fixed with format changes or hiring more local staff.

 

[Rusty Bridges]

I just pulled up the 10K, issued last week, for Paramount Global. The word "Audacy" appears zero times. The word "radio" appears twice (in reference to CBS News Radio).

This is telling. ↑

 

[tbolt909]

CBS sold to Regent, and they went bankrupt, and Townsquare bought Regent out of bankruptcy.

I forgot about Regent. Another success story in the annals of Radio history...