They may have to get a third party involved, but I still see a swap being the most likely way they get out of certain markets since cash buyers are few and far between.
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Audacy Bonuses
- Thread starter exdjted
- Start date
The other issue is that Audacy has moved the Buffalo tower land into its Audacy Atlas holding company, so it wouldn't be included in such a trade.
I'm still unclear of how selling diminished value AM's or swapping stations with other groups would help Audacy's share price. As I recall seeing, they have decent cash reserves, so finding quick cash at pennies on the dollar would be of little benefit for the long haul.
Participants of this board like to focus on individual station formats, or other minutia that has little to do with the financial future as a publicly traded company.
Participants of this board like to focus on individual station formats, or other minutia that has little to do with the financial future as a publicly traded company.
That is correct. However, they are in danger of breaching the covenant on their revolving line of credit, which is related to debt-to-income ratios.
Should that ratio be breached, the company would have its revolving credit agreement, approx. $180 million in debt, come due immediately.
Well, it's not just diminished value AMs. This is the company that also owns WCBS-FM and KRTH and a few pretty serious FMs around the country as well. Maybe it's time to sell them before the court orders it (though it looks like that might have been a call that needed to be made a year or so earlier).
You and I both know there are no white knights riding in to rescue them. I'm just looking at the recent deals they've made and stating what I feel is most likely to happen in the next 6 months. Their recent track record also shows that they'll sell off parts and pieces here and there in order to act like there's some grand over-arching scheme at work. Until David Field adds "Former Wall Street Whiz Kid who destroyed Dad's Entercom with poorly-timed and overly-ambitious expansion" to his Twitter bio, and ACTS on that admission, all they're doing now is rearranging deck chairs on the SS Audacy.
Even in Bankruptcy, it is common for the Execs to get big money to stay on by way of bonuses approved by the courts in order to keep key people from bolting.
It pisses the creditors off a good part of the time too.
It pisses the creditors off a good part of the time too.
"Key people" as in the guys who got you into the mess in the first place.
Shareholders too. With good reason.
well the Captains of Industry should go down with the ship....
Those stations are where the revenue comes from. If you sell the revenue producing stations and keep the money-losing alternative stations, then you head straight to bankruptcy.
The problem with Audacy is that it's only source of revenue is from ad-supported radio. Right now, we're in an advertising depression that is hurting everyone from Spotify to Sirius to NPR. But those companies have other revenue streams, and Audacy does not.
That ignores the fact that those key people also own 22% of the company stock. They have their own personal money invested in this company, just like the creditors.
Also one of the company directors, Joel Hollander, is a former CEO of CBS Radio. He knows the inner workings of the company, and he voted for the bonuses.
They are. This is a family company. The founder and his son run it. They have their own personal money invested in this company.
Swapping wouldn't really help share price, nor would it help significantly with cash flow. Share price is dependent on multiple factors, many of which the company itself has, at best, minimal control. Simply being a radio broadcasting company is almost certainly negatively affecting Audacy's stock value. That's likely the driving factor in it trying to use digital to reposition itself as something else. When swapping properties, the trade involves properties of equal value. Swapping for properties in Detroit or Houston might help a little because of the increased number of sales combinations and the reduction of back office positions, but that would require giving up equal value elsewhere or one party making up the difference in cash. Maybe Audacy would have some way of reshuffling programming in those clusters that would bring in significantly more cash, but I can't see it.
I agree. Unloading high billing properties for cheap, however, is exactly what Audacy appears to have done recently. I can't see how it helps long-term, but it might stave off imminent disaster. I suspect it was trying to avoid tripping a loan covenant and having its debt called. It looks like (to me, anyway) kicking the can further down the road, but desperate people do desperate things.
I wonder what the value of 760 WJR is compared to the other talkers Cumulus took on from the awful Citadel/ABC deal. Detroit is a smaller market, but it appears to be a much stronger performer than the other AM “dinosaurs” that came from that deal are/were.
X times whatever estimated cashflow. X-is a multiple determined by whatever a potential buyer is willing to pay with a revenue estimated return over time. Depending on the debt associated with just one station, and an AM to boot, that X-multiple would be maybe 2X to no more than 4X. But that's assuming there would be a buyer, considering the future of AM stations is increasingly bleak.
Again, what does swapping stations around do for their price per share? Answer: zero. Trading or dumping stations at a loss isn't going to help Audacy regain footing, considering all traditional radio and TV companies are deemed by Wall Street as having no future. How does what amounts to moving chess pieces around change that reputation?
Not only that (which is a really strong point), but we have to look at the synergistic value of stations that are key in clusters. KRTH is of value alone, but it is worth much more as part of a cluster that can be sold in many if not most buyer situations as part of a package.
If one big station in a cluster is sold, the entire cluster is devalued.
The better strategy is to got out of markets where there is no cluster strategy, such as not having "enough" good stations. Swapping, trading or doing complex three-way deals to benefit other groups with weak clusters is likely the best strategy.
Selling individual key stations is not.
The issue is, also, how selling WJR will detract from the "package value" of the company's Detroit cluster. It does not make any sense to break up valuable working clusters when splitting them apart reduces the residual value of the remaining stations.
In Buffalo, one of the examples, it is obvious that they want to either get out of the market or reduce themselves to a specific area of content. They did not have enough FMs to really do well in the future, and the AMs will gradually decline. But they got "prime dollar" pricing on the FM they sold, much more than its worth as a commercial station.
Selling the top performing stations in a viable cluster destroys the synergy of the cluster, meaning that the remaining stations will be worth less and the package sales strength is significantly devalued.
Or what happens when a radio group is removed from a much larger media parent? CBS Radio was integrated with the other parts of CBS, and those synergies gave the radio group value that it lost when it removed from the parent company. I think we're seeing that now.