How Long Will Goldman Sachs Keep the Valley Stations?

[TimeIsTight]

It might be good news that Goldman Sachs will own the Nassau stations in the Valley, and the cluster in Stroudsburg, but Goldman isn't a broadcasting company and won't want to hold them any longer than it has to to get as much of its money back as possible.

Essentially, Goldman set up "credit bids" to establish a minimum acceptable price for the stations and nobody else bid that high.

So, Goldman thinks the stations are worth more than anybody else was willing to pay, and will hold on to them until it can find buyers who will meet its price. With the overall economy growing slowly, station prices may start creeping up and Goldman may be willing to hold them to a certain price level.

Cumulus came in with an $11-million bid for WODE, when Goldman wanted, at least, $14-million. Given the cluster synergies with Cat Country that The Hawk would offer, it is likely Goldman and Cumulus can find common ground in that $3-million gap.

Some of the other stations may also be attractive to particular buyers. WRNJ might be wise to try and get "The Belvidere Bone" back, but the price would have to be right.

It's still early in Goldman's new game, it did let many of Nassau's stations go in other places, but apparently it felt the Valley, and New Jersey stations are worth more than other bidders were willing to pay. Unfortunately, the uncertainty will continue for those interested in Valley radio.

 

[trixter]

It might be good news that Goldman Sachs will own the Nassau stations in the Valley, and the cluster in Stroudsburg, but Goldman isn't a broadcasting company and won't want to hold them any longer than it has to to get as much of its money back as possible.

Essentially, Goldman set up "credit bids" to establish a minimum acceptable price for the stations and nobody else bid that high.

So, Goldman thinks the stations are worth more than anybody else was willing to pay, and will hold on to them until it can find buyers who will meet its price. With the overall economy growing slowly, station prices may start creeping up and Goldman may be willing to hold them to a certain price level.

Cumulus came in with an $11-million bid for WODE, when Goldman wanted, at least, $14-million. Given the cluster synergies with Cat Country that The Hawk would offer, it is likely Goldman and Cumulus can find common ground in that $3-million gap.

Some of the other stations may also be attractive to particular buyers. WRNJ might be wise to try and get "The Belvidere Bone" back, but the price would have to be right.

It's still early in Goldman's new game, it did let many of Nassau's stations go in other places, but apparently it felt the Valley, and New Jersey stations are worth more than other bidders were willing to pay. Unfortunately, the uncertainty will continue for those interested in Valley radio.

Interesting developments from yesterday's auction. Goldman Sacs holds the note to Nassau Properties and Louis Mercatanti stated a couple of months ago he intends to start a new company and bid on these properties. A lot maneuvering behind the scenes. Who knows what may come out of all of this over the weekend before the hearing on Monday!

 

[TimeIsTight]

Louis Mercatanti stated a couple of months ago he intends to start a new company and bid on these properties.

If Mercatanti did form a new company, with the financial juice to be taken seriously, there is no indication from the news reports that it made any truly competitive bids for any of the properties. Remember, Goldman is keeping these stations because it thinks it can get more of its money back by holding them for a while and selling them itself.

Without going through all the figures, Goldman may have originally loaned Nassau almost $260-million, and no matter what happens now it's taking a big haircut and will only get a small fraction of its money back, it just doesn't want to take a bigger hit than it has to.

You're right, this may be a busy weekend for financial negotiators, especially at Goldman and Cumulus and the hearing on Monday may produce some different news, especially on a property like WODE where bidders weren't that far apart and Cumulus has real reason to want that station. Stay tuned and hope for the best for Valley radio types.

 

[Seltzer]

Years ago Clear Channel had to divest 99.9. Why would Cumulus be allowed to buy this frequency today? It would be 3 FMs in basically a 5 FM market.

 

[radiophiler]

This is a guess as to why Cumulus might be allowed to buy WODE (I don't know for sure):

At the time, Clear Channel already had 104 and 95 and two AMs. I'm guessing at the time, Clear Channel wanted to hang onto WAEB-AM 790. That would have given CC four stations in the market (at a minimum): three on FM and one AM.

Perhaps Cumulus would be allowed to own just three FMs. It has no AM station in the Valley now, and it appears it isn't interested in 1230 and 1320.

Also: Was CC forced to divest of WODE because of FCC limits OR because of Department of Justice limits on the total amount of radio revenue it would control in the market? Also, do I recall correctly that at one time you could not own stations with a total of more than 25.0 in the Arbitron ratings?

And who would pick up the Bone and the AM stations, not to mention WSBG if WODE is split off?

 

[TimeIsTight]

It looks like the bankruptcy court approved all the sales of the Nassau Broadcasting stations as was reported last week.

I am assuming that if there were any major changes in bids, with different outcomes, any good reporter would have put them in the lead of her story.

So, the fat lady has sung, and it, probably, all went down as expected with no last minute bids rushing in. And no changes in outcome from weekend negotiations.

Details here:

http://www.law360.com/mergersacquisitions/articles/337898/nassau-broadcasting-s-48m-radio-station-sales-get-clearance

(I didn't sign up for the full report, but if anybody does, please post any corrections, or minor changes in expectations.)

 

[trixter]

It looks like the bankruptcy court approved all the sales of the Nassau Broadcasting stations as was reported last week.

I am assuming that if there were any major changes in bids, with different outcomes, any good reporter would have put them in the lead of her story.

So, the fat lady has sung, and it, probably, all went down as expected with no last minute bids rushing in.  And no changes in outcome from weekend negotiations.

Details here:

http://www.law360.com/mergersacquisitions/articles/337898/nassau-broadcasting-s-48m-radio-station-sales-get-clearance

(I didn't sign up for the full report, but if anybody does, please post any corrections, or minor changes in expectations.)

 


I am still not convinced that Nassau is completely out of the question.  This auction was a chapter 11 auction, not chapter 7.  This is an advantage to Nassau itself.  How many times have Donald Trump gone bankrupted and magically appears out of nowhere doing great once again? Goldman Sachs is now the holder of the Nassau Properties and anybody can bid on them.  If it was me, I would find a way to, at least, purchase part of the properties back.  Keep in mind on all sides, mistakes were made and the economy took a huge dump so it wasn't entirely anybody's fault on what happened (in radio circles.) Many investors have a "forgiven" heart IF they see that there is money to be made when the economy improves.  True, the auction is over but we all know "The Goldman Sachs Store" is now open for business to sell radio stations. Who will ante up first?  The fat lady is tuning up but has not sung the swan song yet!

 

[TimeIsTight]

I am still not convinced that Nassau is completely out of the question.

Hopefully, the numbers will convince you.

Back in 2009, Nassau was in deep financial trouble and agreed with its creditors to swap debt for an 85% equity stake in the company with Louis Mercatanti and other senior managers holding the other 15%.

Then last June 31, Nassau Broadcasting was reported to be $258-million in debt, and Nassau offered to buy itself back from its lenders for $52-million.

Apparently, its lenders wrote down a lot of that huge debt, but in September they filed involuntary Chapter-7 liquidation claiming debts of $84-million. Nassau convinced the court to allow the bankruptcy proceedings to follow Chapter-11 reorganization procedures so the stations could stay on the air. But, the company asked that all its stations be put on the auction block as they would be in a Chapter-7 liquidation.

In normal Chapter-11, companies owe less than their assets are worth, but can't meet scheduled debt payments. They sell some assets and pay debt. In this case, the company owes far more than everything could be sold for. So, when things are sold all the money goes to the creditors, and nothing is left for the company.

Outside of Goldman Sachs credit purchases at last week's auctions, about $10-million in cash was raised from the sale of other stations.

That means Nassau has $74-million to go, before it gets to keep a dime for itself. It ain't gonna happen, even if the remaining stations could be sold. The fat lady has sung. That part is over, Nassau will be no more.

Louis Mercatanti was the principal owner of Nassau, and his entire investment in it is worthless, but he did not personally go bankrupt and may have his own personal resources that would allow him stay in the business, but WPST and WODE are going to ultimately wind up owned by big organizations with deep pockets like Townsquare or Cumulus.

Donald Trump's "Trump Plaza Hotel and Casino" did go through Chapter-11 a couple of times, but it was organized alone. The Donald's other properties were not part of the bankruptcy, not even his other Atlantic City casinos.

The equivalent would be one Nassau station reorganizing its debt, and the all the other stations doing fine. It's really not the same thing at all.

No doubt, Goldman Sachs will be more than willing to sell the remaining stations at what it considers a "fair price." How long that will take is anybody's guess. But, $11-million for WODE, and $22-million for WPST are really big numbers in today's market, so it may take a while.

 

[trixter]

"Donald Trump's "Trump Plaza Hotel and Casino" did go through Chapter-11 a couple of times, but it was organized alone. The Donald's other properties were not part of the bankruptcy, not even his other Atlantic City casinos."....



Excellent points and well thought out. I have a hunch that Lou's personal assets and his other companies were NOT subject to this chapter 11 as well. That will give him some leverage. Another investor or two could make all the difference. There is still some uncertainty in parts of the NE Cluster that who got money and who didn't. I know that it may seem a long shot for Nassau to make some kind of comeback. Every once in awhile, a long shot wins and surprises everyone. I'll stay with my beliefs and roll the dice on this one. I won't flip flop either. I'll sink just like the Titanic if this ends up dead in the water (or underwater!) ;D

 

[TimeIsTight]

I have a hunch that Lou's personal assets and his other companies were NOT subject to this chapter 11 as well.

You don't have to "have a hunch" that is a certainty and it's important to note, that Louis Mercatanti did not go personally bankrupt nor were any other companies he owns involved.

That said, Goldman is asking $11-million for WODE, $22-million for WPST and about $5-million total for the rest. Mercatanti was the principal owner and manager of a company that, reportedly, borrowed about $250-million, and with the cash sales last week, got $10-million of that back, and if Goldman gets what it expects for the other properties that still leaves lenders with loses of more than $200-million related to Nassau. That ain't chickenfeed even on Wall Street, and future lenders will be doing their homework and checking his background.

I suspect it is a safe bet that other lenders are not lining up to finance Mercatanti in his next venture, so unless he still has millions in cash to personally buy radio stations with, or very rich friends, with faith in him, who have that kind of cash, he is probably going to be sitting on the sidelines for a while. It was a tough market, he is far from alone, many ordinary folks have the same underwater situation with their houses, he may be a good businessman and a nice guy, but people with millions to lend probably have many other options with better track records behind them.

 

[chuckhixson]

That said, Goldman is asking $11-million for WODE, $22-million for WPST and about $5-million total for the rest.

Only $5-million total for the rest? That sounds too low and I haven't seen that number anywhere.

 

[Silkie]

The question might be better put, "How long CAN Goldman Sachs keep the Valley stations?", given that we don't know what kind of funds they used to make the buy.

The JP Morgan Chase report was that money that was to be used to prevent such losses was used by JP Morgan Chase to invest in hedge funds. That translates to using required reserves for derivatives trading.

 

[TimeIsTight]

Only $5-million total for the rest? That sounds too low and I haven't seen that number anywhere.

Actually it is $5.7-million for the rest, after you account for $11-million for WODE and $22-million for WPST. And another $700,000 of that is for the two NJ AMs, 920-AM in Trenton, and 1040-AM in Flemington. So, that leaves the rest of the Valley area stations valued at an even $5-million. Goldman's credit bid for the remaining Nassau stations totaled $38.7-million and the math is easy to do after you know that and a few of the other numbers.

The published source for that is AllAccess.com at this link:

http://www.allaccess.com/net-news/archive/story/105621/sale-of-nassau-stations-approved-at-hearing-today

Here is the relevant section.

GOLDMAN SACHS CREDIT PARTNERS L.P., NASSAU's creditor, has used its credit bids in an aggregate of $38.7 million to buy Top 40 WPST, and Religion WCHR-A/TRENTON; Sports WNJE-A (simulcast of WEPN-A/NEW YORK)/FLEMINGTON, NJ, Classic Hits WODE (99.9 THE HAWK), Religion WBYN-A (THE LIGHT 1160 AM), Sports WEEX-A-WTKZ-A (ESPN 1230 AND 1320), and Active Rock WWYY (107 THE BONE)/EASTON-ALLENTOWN-BETHLEHEM; Hot AC WSBG/STROUDSBURG, PA; and Talk WVPO-A/STROUDSBURG-WPLY-A/MOUNT POCONO, PA.

The question might be better put, "How long CAN Goldman Sachs keep the Valley stations?", given that we don't know what kind of funds they used to make the buy.

Actually, we do know the kind of funds Goldman Sachs used to make the buy. It loaned that money to Nassau years ago, and Nassau hasn't been able to pay it back. Money paid by another buyer would go to Goldman Sachs, instead Goldman made a "credit bid" and took the stations. It did that because it wasn't happy with the size of the outside bids for WPST and WODE, and we haven't seen any indication of bids for any of the other stations. Goldman just decided to take the stations instead of the money, and hopes to get more by selling them on its own.

There is no reason to believe that Goldman was using "required reserves" for derivatives trading related to the Nassau situation, and there is no reason to believe that Goldman or JP Morgan Chase are having any financial problems that would threaten their existence. The Chase situation is an expensive embarrassment, but Chase is still profitable. Goldman wasn't involved.

 

[chuckhixson]

DUH! on my part. Thanks for doing the math that I should have done. Be interesting to see how all of this plays out!

 

[chuckhixson]

Have any of the Nassau auction sales closed? I haven't seen anything and it seems like they should have closed by now.

 

[Silkie]

There is no reason to believe that Goldman was using "required reserves" for derivatives trading related to the Nassau situation, and there is no reason to believe that Goldman or JP Morgan Chase are having any financial problems that would threaten their existence. The Chase situation is an expensive embarrassment, but Chase is still profitable. Goldman wasn't involved.

The only real reason I can think of were the news reports at the time that they lost $2,000,000,000.00, which went up to $5,000,000,000.00, and last I heard it was $9,000,000,000.00

You never know who was involved in these things. It's like those nesting dolls, which aren't just for radio anymore.