Cumulus on the Brink Of collapse

http://nypost.com/2017/06/11/cumulus-media-is-on-the-brink-of-a-total-collapse/

Stock value declines, leadership and loss of revenue are at play here for a possible bankrupcy at Cumulus.

RadioPatrol said:

Stock value declines, leadership and loss of revenue are at play here for a possible bankrupcy at Cumulus.

Click to expand...

Except that none of those things have anything to do with bankruptcy.

What triggers a bankruptcy is when a company is unable to meet its obligations. So far, the company has made its loan payments on time. No creditor has challenged them on meeting obligations. The primary creditor, Crestview, is the company that made the leadership change in 2015, and has supported all the bonuses paid to management.

Obviously $2 billion is a lot of money. If it was all due immediately, the company would have to declare bankruptcy. But that hasn't happened, and there's no reason to believe it will happen this week or any time this year. There is a lot of talk in the trades about possible asset sales or station trades with Entercom. None of that was mentioned in this article.

The article focuses on the stock price, but ignores the fact that the stock price has doubled in the last two months. Of course, what that means is it went from 25 cents to 50 cents. That's still under a dollar, but it's showing positive momentum. Today, the stock is up about 4 cents. Something appears to be driving this recent upward movement in stock price. There has been a new investor in the company in the past few months. That wasn't mentioned in the article.

My point being, this article doesn't tell the whole story. It cherry-picks a few things that proves its point. But this same publication has been predicting bankruptcy for Cumulus and iHeart for several years, and neither has actually gone belly-up yet. So the claim that the company is "on the brink of collapse" seems a bit overstated, given all of the facts.

I agree with the Big A. Most of the debt Cumulus faces is money the PE firms that invested in it are owed. It doesn't seem like bankruptcy is on the horizon (unless they start selling that debt).

I also don't look for Lew Dickey to try to buy the company back through stock purchases. The recent changes to the stock rights may be designed to fend off a takeover attempt by Lew, though. With Oaktree rumored to be looking to get out of Townsquare, I suspect it's a more likely target for Lew than Cumulus.

Kent said:

I also don't look for Lew Dickey to try to buy the company back through stock purchases.

Click to expand...

I agree. Lew already owns a ton of Cumulus stock, and it's all worth a fraction of what it once was. Why would he want to add to his headache?

I think the change in stock rights was to provide some kind of bonus to the investment company that recently bought a bunch of stock. No one's getting rich off this stock, so if they can give current stockholders some kind of equity, they might hang on longer.

I doubt that Lew has enough capital to buy all of Cumulus, even with the depressed stock price. I suspect he'll look for opportunities via Entercom station sales or approach Cumulus about buying some individual stations.

It's surprising that he'd find any capital to back him after how badly he managed Cumulus.

umfan said:

It's surprising that he'd find any capital to back him after how badly he managed Cumulus.

Click to expand...

It says a lot about how easy it is to get investment money. He got access to all that money without any target specified. Imagine doing that as a private person at a bank.

I worked at a cluster that was acquired by Cumulus and stayed on a few months after the change. My friends and I from the group used to say, "How do you make a million in radio? Give Lew Dickey $100 million!"

So do you think Cumulus or iHeart will go down first? (I think both will go down eventually)

AMRocks said:

So do you think Cumulus or iHeart will go down first? (I think both will go down eventually)

Click to expand...

What do you mean by "go down?" Will there be a re-organization? Maybe. Unless they find some other way around making loan payments.

Keep in mind lots of companies and individuals go through the various forms of bankruptcies. Even the current president did it.

EnterCom will be to CBS radio what Cumm Less is to ABC radio.

kf4rca said:

EnterCom will be to CBS radio what Cumm Less is to ABC radio.

Click to expand...

The analogy might work better the other way around.

DavidEduardo said:

Entercom is one of the better operators. The real issue for all radio companies, good or not so good, is the slowly contracting revenue pool for radio and the need to keep controlling costs.

Click to expand...

The issue I see in that analogy is the cost basis for radio divisions of TV companies (ABC and CBS) is very different from a radio-only company. We saw it on a small scale for Regent, Wilks, and Beasley, when they bought a handful of CBS stations. Entercom is a well run company, but they will see things in running CBS that they've never seen before. As they convert CBS radio stations to the Entercom way, there will be economies that will challenge both employees and listeners.

EnterCom's 101.1 still has a dead carrier on it. Has to be a bad ROI considering they're probably paying $1K a month site rent. (I can't see it being any less for this market.)
AND coupled with the Sacramento disaster a few years ago, it doesn't sound like a well-run company to me!