KMCQ - First Broadcasting - OOPS

[bossbill]

This just posted on Radio Ink. Looks like a sheriff's sale:

NOTICE OF PUBLIC DISPOSITION OF COLLATERAL
Reference is made to the Revolving Credit and Security Agreement dated as of December 19, 2003 (as amended to date, the “Credit Agreement”) between the financial institutions parties thereto, as the Lenders thereunder, CapitalSource Finance LLC, as the Agent thereunder for the benefit of such Lenders (the “Agent”), and First Broadcasting Capital Partners, LLC, as the Borrower thereunder (the “Borrower”). Capitalized terms used but not elsewhere defined herein shall have the respective meanings ascribed to such terms in the Credit Agreement.
Due to the occurrence of various Events of Default under the Credit Agreement, including the Borrower’s failure to pay the Obligations in full at maturity, the Agent, as secured party for the benefit of the Lenders, pursuant to the terms of the Credit Agreement and Section 9-610 of the Uniform Commercial Code as adopted and in effect in the State of Maryland, will sell, at a PUBLIC SALE, all assets and properties of the Borrower included in the Collateral (as such term is defined in the Credit Agreement), which includes certain assets used or useful in connection with the ownership and operation of radio stations KMCQ-FM licensed to Covington, Washington, WAOL licensed to Ripley, Ohio, and WOXY licensed to Mason, Ohio, to the highest qualified bidder in public.

 

[bossbill]

Minor correction - it was posted on Inside Radio, under "Opportunities". Sale date Feb 23.

 

[radioguy123]

Wonder if someone might buy this station and bring back Smooth Jazz? With the low power signal located on Cougar Mountain it is perfect for Eastside and Seattle office music formats or an in car format. Sports or News on FM or any Eastside/Downtown office music format like Smooth Jazz, might work. Signal is too weak to penetrate most buildings outside Eastside and downtown core ruling out formats like AC, HOT-AC, Rock, Classic ROck, Country, Oldies, CHR, anything that relies on big office listening in South King, Snohomish, Pierce and Kitsap counties. Talk, News, Sports or upscale AAA or Smooth Jazz music formats all might work. Station could be tough to sell at auction next week.

 

[radioplayer]

This is absolutely classic. KMCQ's lack of any proven sales, combined with no numbers to show from PPM, makes this entire thing a true turkey. Only the company with lots of cash to spend and one who doesn't really care about the near term would even approach this thing. The auction price will be totally speculative and in this economy, the station will fetch even less than usual. Overall, a perfect storm in the final demise of this station. I'd like to see some ideas on just how much anyone thinks this bird will go for.....I'm going to guess that it's not going to go for more than 5 mil. The buyer better have some extra dough to shore up the contracts, leases on the tower and that transmitter before the reapo man comes for the hardware too. They'll have that month-to-month cost and whatever programming costs to consider, right after the hammer hits the pad.

 

[bossbill]

In this case, nothing to do with sales or numbers. It's all about "stick value". First Broadcasting was one of a number of "move-in" speculators. The object is to purchase a signal and move it closer to a major market. Most move-ins are rim shots, but KMCQ is actually an in-market signal now (although less power than most of existing in-market signals).

Unfortunately a down economy got in the way and brought values and station transactions way down.

First chose to do things the hard way, selecting a signal in The Dalles and spending several years getting it moved. While First was spending investors' money with their move-ins, others were moving signals to near Portland from Tillamook (twice), and Astoria, and close to Seattle from Raymond and from Aberdeen. There are dozens more examples in other markets, including Salt Lake, where there may have been as many as 3 move-ins at the same time.

The concept is that eventually a player will acquire one of the signals to actually operate it. But First Broadcasting is not a radio station "operator".

Remember the early and lengthy battles between First and Morris, with Morris hoping to end up moving one of their Aberdeen properties to "Shoreline" instead of the First proposal for "Covington"?

 

[dunno]

Sorry to laugh to hard radio player but 5 mill would be the steal of the century. They wanted 20 plus, 25 is what I heard. I'm thinking closer to 12 to 20 max will be the price. With a good operator, 5 would be at most 1.5 to 2.0 x earnings.

Bill or Guru should have a better guess than me.

Gotta believe all players in market will make a bid. In my op would not be a good stand alone.

 

[fremont]

I sure enjoy their music.

 

[FMSteve]

Unbelievable! I think First Broadcasting paid 5.5 million and had an escalation clause to pay the then-owner of KMCQ (The Dalles, Oregon) another sum if they got to Cougar. So I think they are in or should I say "were" in it maybe 6 million. Add in all of their other expenses related to allocating the channel and building the Enumclaw and Cougar sites, lawyer and engineering fees, I'd say their cost basis is 7.5 million.

What is it worth? Who knows! I guess we'll find out soon enough. What will be the format? After considerable thought I'd like to see a KOMO triplecast (kudos to Indigo Coyote for promoting that idea), FM Sports Radio, or a wholly new format like Urban AC.....but likely yet another "rock" station to battle the rest of the rock stations in the market.

 

[Scoobyfan1]

It would be nice for KMCQ to keep their current format of Oldies/Classic Hits, but if not I guess any format they chose would be OK, as long as it's not Spanish anything

 

[bossbill]

Re: KMCQ - First Broadcasting - Fire Sale

Anybody want to go in with me on this one?

 

[radioplayer]

In this case, nothing to do with sales or numbers. It's all about "stick value"......

Bill,

Sorry I wasn't clear in my last post but I totally agree w/you and what I wrote earlier was effectively the same point as yours.

Because KMCQ does not have any numbers, they now get totally bitten off and have no proven numbers nor cash flow to show anyone that the station's worth anything beyond their 'stick value'.

I also agree with you that all their 'delays' in getting the thing moved to Seattle proves my previous posts quite clearly. The fact that they had long protracted battles with KMIH, 3x Bogy and then KAFE and after that, Canada regarding their swaps and moves there (to accommodate KAFE again) really cost them dearly, right up to the end.

I'd love to see the final balance sheet; how much they spent 'investing' vs. how much they will really lose in real $$ when this is all said and done.

You can laugh all you want regarding my 5 Mil figure but remember, this is no longer a traditional sale-it's now controlled by the auctioneer and by the folks (banks and investors and collectors on that debt) trying to cut their losses and get whatever they can. In the end, they will settle for whatever they can get. This means, no one looking to buy the hut in this case (no main studios, no real facilities whatsoever) will fork out anywhere near the normal stick value/market coverage price.

They will totally low ball the deal to get their best price and it will sell far below 'market value' First cannot object or hold out for more as they are no longer in control. The banks are, and they aren't looking for top dollar. They are looking to get rid of this turkey.

I wish I could jump in and help you Bill.....It would be a fun experiment to try and make something out of the station....but like you, I have no money.

 

[bossbill]

Well, I'm cashing in my Staples Rewards checks and my Taco Bell gift card for this one... I wonder if the iPod comes with the deal.

 

[radioplayer]

I think I still have a gift certificate from Toys R Us that I could use.....

 

[radioguy123]

5 million could be high. Wilkes bought two FM's in Denver a year or so ago for five million. Prices are down since then. Stick value ain't what it used to be.

 

[Shiny Knob]

It's important to remember that the bankers can't force the sale of the radio station license. They can foreclose on the buildings and all tangible assets. But anybody who wants to own the radio station still has to bargain with the owner, or the owner's trustee and come up with a fair price. That part doesn't go to auction.

And yeah, I know, it's not fair, yadda yadda. Whine whine, I want to buy a major market station for 500 bucks in an auction.

But unlike the deal with Boss Hogg and the local sheriff, you've got to buy radio station licenses by the book. And the FCC writes the book.

I know Bill knows that too. But he's having a little fun here and the expense of the more gullible members of this board.

But maybe we can all chip in and make them an offer they can't refuse for the station.

Meanwhile, I'm ready to offer the sheriff $20 for the KMCQ "automation system." I'm guessing it's Harmony House brand. Maybe Realistic.

 

[TexasTom]

It's important to remember that the bankers can't force the sale of the radio station license. They can foreclose on the buildings and all tangible assets. But anybody who wants to own the radio station still has to bargain with the owner, or the owner's trustee and come up with a fair price. That part doesn't go to auction.

Or it can get auctioned off in a bankruptcy court auction. We recently saw a pair of Texas television stations (KNWS/51 Houston, KLDT/Dallas-Fort Worth) go this route -- the stations were auctioned to the highest bidder over the protects of the debtor-in-possesion, Johnson Broadcasting. Many years ago, this is what happened to Tacoma's channel 13 (then KTVW), which was auctioned to the highest bidder in bankruptcy court way back in 1975 -- when, to everyone's surprise, the top bidder was the Clover Park School District.

So it isn't necessarily the case that whoever acquires KMCQ will have to negotiate anything with First Broadcasting or it's trustees.

 

[TexasTom]

Sorry to laugh to hard radio player but 5 mill would be the steal of the century. They wanted 20 plus, 25 is what I heard. I'm thinking closer to 12 to 20 max will be the price. With a good operator, 5 would be at most 1.5 to 2.0 x earnings.

Five years ago, they could maybe have gotten the price range you're suggesting. Today -- I seriously doubt it. Station prices are *way* down from the peaks of a few years ago.

 

[Shiny Knob]

So it isn't necessarily the case that whoever acquires KMCQ will have to negotiate anything with First Broadcasting or it's trustees.

Okay, I wasn't trying to get involved in a stupid argument with you. You'll win every time.

The point is that the FCC is very picky about who gets to have a license, and the sheriff isn't the person who makes that decision.

The note from Bill said it was a sheriff's auction. That means real property gets sold off to settle an unpaid note, often with the government. The sheriff doesn't do intangibles.

There is no info here or anywhere that this sale is the result of a bankruptcy action, where different rules apply.

If I wanted to get into a fight with you, I'd probably drop by in person and insult you, just to even a really old score.

 

[bossbill]

I was taking artistic license when I said "looks like a sheriff's sale". In fact, it is a PUBLIC SALE of assets that were used as collateral for their financing. From the Public Notice:

"The Collateral includes all accounts, goods, inventory, equipment, fixtures, general intangibles, investment property (including certificated and uncertificated securities), deposit accounts, documents, instruments, chattel paper, copyrights, patents, and trademarks of the Borrower, all additions and accessions to the foregoing, all products and proceeds thereof, as more particularly described in the Credit Agreement."


The Public Sale is in Chicago on Wednesday. I've found nothing regarding a bankruptcy filing. While the FCC does need to approve transfers of control, it can and does approve involuntary transfers. Whether the lenders were smart enough to include language in the Credit Agreements to address this, we mere observers don't know.

Yes, I have fun with this stuff. A First Broadcasting representative actually drove to Aberdeen several years ago, attempting to convince me to give them an OPTION on one of my stations. I told her that I would entertain a sale involving large amounts of cash, but that an option was out of the question. I also had conversations with Chris Devine of College Creek, who wanted to move something like 12 (or 15 or 19, can't remember now) frequencies in order to improve two signals close Seattle (one of them mine).

The speculators like to do options. Sometimes their schemes work out. Line em' up, then figure out what to do with them.

Now I'm upping the ante. I found 2 Arby's Gift cards...

 

[Goldilocks94941]

In the meantime, it sure would be nice to see some playlists from KMCQ of the music they're playing, and their sources for it. I've been hearing songs I haven't heard since they were "hits" in their original release - OK, maybe as a "recurrent" a year later. I might even have to find some blank cassettes and hit the dusty record button on my boom box to hang on to a few hours.

It's remarkable how much actual American music the so-called "classic hits" version of an oldies format skips over. Seems to me KMCQ's playlists are a lot more appropriate for broadcast radio than KJR-FM's, or any of the other over-researched "no-risk" stations that freeze their song list to less than 500 cuts for perpetuity. Seem that those are the outlets that are better suited to an mp3 player subscription, where it will all fit with ease, than to being all we can hear in most markets on the radio dial.

I know, the same 3 or 4 posters will respond that that's what's "selling" with the sales depts. and ad agency media buyers who only want one listener demographic anymore. I'm suggesting that the current economics of commercial radio guarantees that the wrong people get to control what airs on local radio nationwide now. Too bad their corporate structure and culture can't encompass more than one way to operate a local radio station, or to provide audiences with just plain entertaining radio that, at least on occasion, exploits the artistic merits of the medium of radio. Instead, the Medium = Mediocrity that you can bank on.

Would seem that if the myth of an objective marketplace was true, the dropping prices of station licenses, and the additonal competition from new signals and other media, would foster a climate in which more than a half dozen highly predictable music formats could exist. So why can't an expansive oldies format, or any form of classical music, or "smooth" jazz, or even straightahead-jazz, or eclectic adult alternative, or world music or drama and storytelling, etc. exist on the radio airwaves -- apart from the schedules of some nonconmmercial outlets? It's because there aren't enough different radio licencees being allowed to operate stations anymore, in my opinion. And the handful of corporate "owners" we get are busy with death-match rivalries that imitate each other, but don't foster a climate in which air talent or music and program directors are free to do much of anything "new."

The NAB-sponsored lifting of ownership limits has turned that sacred-cow "marketplace" into a members-only club for a chosen few who already hold licenses, plus a handful of religious empire builders who found a loophole to fill up the dial with their translators and used those stations to fill their treasuries with a nationwide tax-exempt status, to boot! Kinda like going up for the third time for the all you can eat Sunday brunch at the country club. To bad they don't even tip the rest room staff who have to clean up the product of their over-indulgence!

So with KMCQ, (which may in itself be cursed in an odd way for shutting down a viable station on the radio-underserved Columbia River Gorge to do this in the first place) -- a new, major market signal is waiting to be scooped up by a creditor. While, at the same time, radio specialty formats keep dropping like flies in a stuffy room.

What kind of future do the powers-that-control-commercial radio really envision for the radio industry? I'm talking ten to 20 years from now, and beyond. I'm hoping that some of these people actually care about the industry, apart from their own pensions. But I don't hear anything about that, here or in the trades. Not while the all-you-can-eat-members-only buffet is still open.