iHeart close to bankruptcy?

[davideduardo]

While I appreciate your insight, and I am sorry to go off topic (as this was meant to be, for Cincinnati) but I am quite certain that Cumulus and iHeartRadio will always risk some form of bankruptcy; due to the points that I mentioned above. The only alternative for them would be to simply sell off a few stations. But that would be playing into another Radio competitors' (i.e. Entercom, Townsquare) strong hand.

The issue is that the stations, sold separately, are worth less than the total debt. A lot less. So selling a few stations at far less than were paid for them does not pay down the debt much, and reduces the ongoing cash flow that could be used to pay the remaining debt.

Example: in 2000, the 5 LA FMs were worth, in total, about $1.6 to 1.7 billion if we used what Radio One paid in that era for its single station ($400 million). Today, even with the large cash flow, they are likely worth perhaps $500 to $600 million at best... so it's not worth selling them in pieces.

Personally, I cannot understand how Cumulus and iHeartMedia have avoided Bankruptcy for so long.

They are both profitable on an operating business. The groups of radio stations make money.

They don't make enough money to pay the loans, though. They have managed to "kick the can" down the road by a combination of asset sales (like the towers, owned property sold and leased back, etc.) and refinancing. However, all they have done is postpone the payment of debts that are coming due eventually.

But one explanation is that they are being illegally funded by corporations or our own (Federal government?). These two corporations should be seeing the same things that Citadel was becoming before it eventually folded. I struggle to make sense of how they are doing it, and am wondering if there is a secret scandal going on that is keeping both companies on welfare.

It's normal business. Kind of like using one credit card to pay off another. Eventually, there is a time when the house of cards collapses or the lenders do a debt restructuring.

The government has nothing to do with this. And the only "corporations" involved are the lenders and investment bankers who bankrolled the original purchases. This is like the mobster who will break the kneecaps of someone who is behind on his vig, but who will not kill the debtor as dead men don't pay their debts.

So the lenders want both of those groups alive, because they think that they can at least get some of the money back. And "some" is better than "none". Bankruptcy generally results in none or little of the money being paid.

 

[gr8oldies]

Since so many of the old radio guy contingent is predicting not just chapter 11 but Chapter 7 liquidation, how would that even look if it occurred?

 

[TheBigA]

Since so many of the old radio guy contingent is predicting not just chapter 11 but Chapter 7 liquidation, how would that even look if it occurred?

I did a quick research on the precedent for such a thing, and it would require the judge officiating in the case to want to punish the company for wrong-doing in getting the company to this state. I don't think that's warranted, especially because of the company's numerous attempts to negotiate the terms of its debt. I would expect a judge would say the company made numerous good-faith attempts to present terms to lenders, and lenders chose to ignore them. The fact that we have a report that a group of lenders who have agreed not to accept any terms shows bad faith on the part of the lenders. Considering all of this, it's hard for me to imagine a judge wanting to change this to a Chapter 7.

 

[CosmicMagician]

It may extended the life of those heritage stations, but it has also created a situation where the company bought too many signals in a market and dumbed them down so much that they are boring to listen to. WKRC WCKY & WSAI in their day served the area with separate programming and they were competing for audience share which made for more compelling programming which was locally produced. IHeart and Cumulus are both in bad shape and one reason is the never invested in programming that can create the attention of listeners and advertisers.

YES!!! You have said what I have been trying to say. My exact words--only you articulated it better. These two media moguls (Clear Channel + Cumulus) have always made Radio in America boring and lacking in flavor.

This is, in my opinion; the problem with radio these days. There is no individuality and no creativity.

 

[gr8oldies]

Talk to anybody whoever worked in the Drake system. Those stations were successful because they were strict.

Rush are only a small example I made. But this is how a lot of artists in the old days of Radio got their break. (that is, if the mainstream American music industry did not pick these artists up.) I remember how a band from Portland, for example; known as Seafood Mama (later known as Quarterflash) were picked up by Geffen Records after local radio stations in Portland would play a few of Seafood Mama's songs. "Harden My Heart" became a local hit. Seafood Mama released their music on a private independent label before changing their name to Quarterflash and were very popular even before Geffen Records signed them and had them re-record Harden My Heart as well as their own debut LP.

"Very, very, very few stations "in the 70's" had DJs that played anything they wanted."

This is not true, from my recollection. Radio stations had more individuality and variety in those days. AOR and Pop stations would play whatever. They had more variety and were not nearly as strict as the music formats we have today. A Pop station in the 70s could cross into Funk/Disco music and even into Old school Country or Folk/Progressive rock. Something that cannot be done today. (i.e. Ever hear Hip Hop stations crossing into Country? Well no, because both genres are too strict and too different and apply to different audiences.) But as I said before, a Pop station in the 70s could cross into Country and even into Jazz or Disco, while being predominantly a Pop station. These days, this does not happen. And this is the main reason why these big radio corporations are boring the listeners.

 

[TheBigA]

This is, in my opinion; the problem with radio these days. There is no individuality and no creativity.

Sure there is. You just don't recognize it. Ownership has nothing to do with "individuality and creativity." You mentioned WMMS before, and it was owned by Metromedia, a company that owned rock stations in NY, Philadelphia, LA, San Francisco, Chicago, and Detroit. This was all pre-1996. They ran them with the same formats, same style, in every town. When WMMS started playing Rush, as you indicated, the record was picked up by co-owned stations in other markets. Same with Springsteen on WNEW or WMMR. ABC Radio and RKO Radio did the same thing with Top 40 in the 60s and 70s. You might remember the King Biscuit Flower Hour, an early syndicated radio show, heard on a hundred or so rock radio stations. How do you think these things became popular?

You want individuality and creativity? That's what non-commercial radio is all about. Go down to the lower end of FM and listen.

 

[microbob]

You want individuality and creativity? That's what non-commercial radio is all about. Go down to the lower end of FM and listen.

Or better yet dump radio all together and find a podcast to listen to. There are many creative people producing quality content for free.

 

[TheBigA]

These two media moguls (Clear Channel + Cumulus) have always made Radio in America boring and lacking in flavor.

Take a look at the most listened-to radio stations in Cincinnati:

http://ratings.****************/cgi-bin/rol.exe/arb031

To you, it's boring. To everyone else, it's popular.

 

[microbob]

And those audience shares keep shrinking year after year. Or is that due to other factors besides an aging audience and increased competition from digital?

 

[davideduardo]

And those audience shares keep shrinking year after year. Or is that due to other factors besides an aging audience and increased competition from digital?

Audience shares do not shrink year to year. There are always 100 of them.

In the last book, the top 10 stations had 52.6 shares. In Spring of 1985, the top 10 stations had 75.0 shares. What has happened, in no small part due to the PPM, is that there has been greater fragmentation with the mid-tier stations showing a greater share of total listening.

 

[gr8oldies]

Radio is never going to be personalized just to you.

 

[Kelly A]

The iHeart assets are, conservatively, worth about 1/3 to 1/2 of the debt. So they are worth more as a whole, producing cash flow, than if broken up.

If the lenders do not bend, then iHeart declares Chapter 11 and the unsecured lenders get nothing as debts could be fully discharged. Better to take a haircut than to be decapitated.

And that's why IHeart sent their notice letter to the SEC around NAB this year, to get the attention of the VC firms/lenders to either come to the table and renegotiate the debts, or be ready to walk away with zip in the event of iHeart filing Chapter 11. In other words, last call.

 

[FRR]

Rush are only a small example I made. But this is how a lot of artists in the old days of Radio got their break. (that is, if the mainstream American music industry did not pick these artists up.) I remember how a band from Portland, for example; known as Seafood Mama (later known as Quarterflash) were picked up by Geffen Records after local radio stations in Portland would play a few of Seafood Mama's songs. "Harden My Heart" became a local hit. Seafood Mama released their music on a private independent label before changing their name to Quarterflash and were very popular even before Geffen Records signed them and had them re-record Harden My Heart as well as their own debut LP.

"Very, very, very few stations "in the 70's" had DJs that played anything they wanted."

This is not true, from my recollection. Radio stations had more individuality and variety in those days. AOR and Pop stations would play whatever. They had more variety and were not nearly as strict as the music formats we have today. A Pop station in the 70s could cross into Funk/Disco music and even into Old school Country or Folk/Progressive rock. Something that cannot be done today. (i.e. Ever hear Hip Hop stations crossing into Country? Well no, because both genres are too strict and too different and apply to different audiences.) But as I said before, a Pop station in the 70s could cross into Country and even into Jazz or Disco, while being predominantly a Pop station. These days, this does not happen. And this is the main reason why these big radio corporations are boring the listeners.

Absolutely boring. You hit the nail on the head!

 

[TheBigA]

Absolutely boring. You hit the nail on the head!

And yet, those are the most popular radio stations in town.

 

[davideduardo]

Absolutely boring. You hit the nail on the head!

How can a position based on totally inaccurate facts be hitting the nail on the head?

The supposition that there were lots of stations in the 70's that allowed DJs to pick their own music is patently false. Yes, some of the progressive rock stations were freeform with each jock programming their own music. But the bulk of AOR stations were tightly formatted and supervised by consultants like Abrams and Pollack.

"Pop" stations (by which I assume the OP meant "Top 40") did not play "whatever". They were very tightly formatted with strict clocks and rotations. AOR stations, as just mentioned, were tightly controlled and had restricted playlists.

Times seem better when seen in the rear view mirror. Tastes have changed and listeners expect different things from each kind of radio station; those stations were not "better" but just different.