Cumulus wants to nix the WLUP/WKQX deal
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Thread: Cumulus wants to nix the WLUP/WKQX deal

  1. #1

    Cumulus wants to nix the WLUP/WKQX deal

    The Restructuring Term Sheet wants all claims owed to Merlin Media to be fully subordinate to all other bankruptcy claims and seeks no distributions or payments of any kind to Merlin Media.

    In other words, Cumulus wants to completely walk away from the deal, free of charge (other than the LMA payments they've already made).

    This means, going forward, it is possible that Merlin Media will have to resume operating the stations themselves and put them back on the market. That could be bad news for current employees.


    The full Restructuring Term Sheet begins on page 94:
    http://document.epiq11.com/document/...rojectCode=CUI

    Pay particular attention to page 97.
    Last edited by MarkW; 11-30-2017 at 09:46 PM.

  2. #2
    Tom Taylor's newsletter today said that reference has to do with back LMA fees due to Merlin. So Merlin is an unsecured creditor, along with about 50 other companies. Neither he nor RadioInk, who also showed Merlin as an unsecured creditor, mentioned completely walking away from the deal. The only amount listed was the LMA fees, not the sale price. I guess the question is the actual status of the deal at the time of the bankruptcy.

    However, you'd be correct that under the terms of a Chap 11, the company could walk away from all previous agreements, but that would be subject to the approval of the court. I saw in the restructure term sheet that the company intends to retain all existing talent & programming contracts. That is usually one of the first things the court addresses. I recall how Citadel handled it, that within minutes of the terms being approved by the court, there was a companion announcement that contracts will be honored. That included contracts with sports teams that the company has.

  3. #3
    You raise very good points. Can anyone browsing this forum confirm whether or not Cumulus actually paid the $50 million to Merlin?

    RBR reported the following:
    The terms have not been changed since 2014, and it pay an amount equal to the greater of $70 million minus the aggregate amount of monthly LMA fees. Or, Cumulus may pay $50 million with 90 ninety days of the LMA’s fourth anniversary — January 2018.

    Given the timing of the Form 314 filing, is is believed that the $50 million option is being executed at this time by Cumulus.
    Source: http://www.rbr.com/chicago-alternati...ma-conversion/

    Let's assume for a second Cumulus has NOT paid the $50 million.

    What recourse would Merlin Media have against Cumulus under such a scenario? Isn't Merlin "made whole" by virtue of the fact they retain ownership of the stations, whose combined fair market value easily exceeds the $50 million payment that's due? I don't see how an unsecured claim would be due & owing. I assumed this was why the unsecured claim allocable to Merlin Media listed in the first day filings was limited to delinquent LMA payments.
    Last edited by MarkW; 12-01-2017 at 06:52 PM.

  4. #4
    I should add only the top 20 unsecured claims are listed on the bankruptcy petition.

    The instructions clearly state "...do not include claims by secured creditors, unless the unsecured claim resulting from inadequate collateral value places the creditor among the holders of the 20 largest unsecured claims."

    I would argue the $50 million owed to Merlin is a fully collateralized claim. Why? Simple. The fair market value of WLUP & WKQX on a combined basis exceeds $50 million.

    Bottom line: Mr. Taylor's reading of the tea leaves may or may not be correct. I need to see some proof.

    I don't see how Cumulus would have "ample cash on hand" if they already forked over the $50 million.

  5. #5
    Quote Originally Posted by MarkW View Post

    I don't see how Cumulus would have "ample cash on hand" if they already forked over the $50 million.

    Keep in mind they got $125 million in September from the sale of the KABC tower property.

    The Merlin deal was announced in October.

  6. #6
    Yeah, it was "announced."

    Announcing a deal and actually closing the deal are two separate things. The FCC database still shows a subsidiary of Merlin Media as the owner of both stations.

    Also, did you read Cumulus 10-Q filing from September 30? Their cash on hand was only about $69 million, if I remember correctly. They hemorrhaged a LOT of cash in Q3. At June 30, I believe they had about $140 million in cash on hand.

    Assuming you are correct that the KABC land deal closed in September, I suspect a large portion of that $125 million was used to prepay the Term Loan (the remainder likely was spent on closing costs and taxes).

  7. #7

    Join Date
    Oct 2004
    Location
    Richmond, Victoria, Australia
    Posts
    845
    Following the recent Entercom/CBS deals, could they swoop in and grab the Merlin properties? I asked this on another thread, but was dismissed. The deal was announced days before the bankruptcy talks started up. In my mind, when Cumulus started talking bankruptcy, this deal would have been the first to bite the dust. Plus, from an Entercom view, these stations could see them create a "wall of Rock".
    Radio station employee...<br />Amateur photographer...<br />Cat slave...<br />Sarcasm expert...<br />Annual USA visitor...

  8. #8

    Join Date
    Jan 2012
    Location
    Strongsville, Ohio
    Posts
    1,100
    No. They're already at the limits for FMs in Chi-Town.

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