Steel City Media files for Chapter 11

https://www.allaccess.com/net-news/...er-radio-company-goes-chapter-11-with-kansas-

Wow! Amazing while the rest of the nation is paying attention to the fallout of Iheart and Cumulus Chapter 11 Another Radio Company gets hit with the same issue.

MICHAEL J. FRISCHLING's MGTF RADIO COMPANY, LLC d/b/a STEEL CITY MEDIA in KANSAS CITY, has filed for Chapter 11 bankruptcy reorganization. STEEL CITY's stations include Country KBEQ (Q104), Country KFKF, Top 40 KMXV (MIX 93.3), and AC KCKC (KC 102.1)/KANSAS CITY; the company bought the cluster from WILKS LICENSE COMPANY-KANSAS CITY LLC for $105.5 million in 2014. A separate entity, WPNT MEDIA SUBSIDIARY, LLC, owns Hot AC WLTJ (Q92.9) and Adult Hits WRRK (96.9 BOB FM)/PITTSBURGH and is not listed in the petition filed with the bankruptcy court.

The company filed its petition today (3/20) in U.S. Bankruptcy Court for the Eastern District of MISSOURI, placing both debts and assets in the $50-100 million range and listing among its top creditors lenders FIFTH THIRD BANK, owed $38.477,998; BUSINESS DEVELOPMENT CORP. OF AMERICA, owed $24.5 million; plus smaller debts to NIELSEN; BMI; ASCAP; SESAC; SOUND EXCHANGE;

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Considering Steel City paid about what Entercom paid for all of Lincoln Financial for a single cluster, this isn’t that surprising. Only real surprise was how suddenly it seemed to happen. Of course, it’s a private company. So, its finances weren’t publicly scrutinized.

Question is whether the Frischlings will be able to keep it. That cluster would seem to be a good fit for Hubbard or maybe even Bonneville if they can’t. KC is also one of the few top-50 markets iHeart isn’t in, but it bypassed the chance to buy that cluster when CBS put it on the block in '06 when its financial health was a lot better.

The company owns two top-rated and highly regarded country stations, and iHeart is very committed to the country format, so once it gets past its own problems, you might see iHeart getting involved. Or maybe Entercom bringing the former CBS stations back into its system. Or the companies you suggest.

The 2 Pittsburgh stations were doing relatively well, last I heard.
They had spun-off the local City Paper free tabloid to a suburban newspaper group
about two years ago.

Kent said:

Question is whether the Frischlings will be able to keep it. That cluster would seem to be a good fit for Hubbard or maybe even Bonneville if they can’t. KC is also one of the few top-50 markets iHeart isn’t in, but it bypassed the chance to buy that cluster when CBS put it on the block in '06 when its financial health was a lot better.

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I certainly think that cluster would be a better fit for iHeartMedia, considering that Kansas City is the only PPM market where iHeart doesn't own any stations.

Pittsburgh too...


https://www.allaccess.com/net-news/...-city-media-s-bankruptcy-includes-pittsburgh-


"The bankruptcy of STEEL CITY MEDIA's KANSAS CITY subsidiary MGTF RADIO COMPANY, LLC, first reported here on ALL ACCESS (NET NEWS 3/20), did not initially show a filing covering the company's PITTSBURGH stations, but, sure enough, WPNT MEDIA SUBSIDIARY, LLC, STEEL CITY's other subsidiary which owns Hot AC WLTJ (Q92.9) and Adult Hits WRRK (96.9 BOB FM)/PITTSBURGH, has also filed for Chapter 11 reorganization."

TheBigA said:

The company owns two top-rated and highly regarded country stations, and iHeart is very committed to the country format, so once it gets past its own problems, you might see iHeart getting involved. Or maybe Entercom bringing the former CBS stations back into its system. Or the companies you suggest.

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Entercom won't be the likely buyer of Steel City's KC cluster as it already owns a full-compliment of stations there. I suppose it reshuffled its cluster once before when it bought Sinclair, but the current Entercom cluster does better than Steel City, or so I'm told. I understand about 80% of the market's revenue goes through Entercom, Cumulus, and Steel City. There's only one non-religious commercial FM in the market outside of those three clusters.

The release following Steel City's bankruptcy of the Pittsburgh cluster seems to indicate the Frischlings think they have a good chance of retaining the stations after the bankruptcy proceedings. While not common, that's not unheard of either. If Steel City really has about the same value of assets against liabilities, it might be able to hold on.

Based on what I know about the banks that hold the bulk of Steel City's debt, they’re not going to want to swap that debt for equity, or at least not enough to end up controlling the operation. They’ll probably either work with the Frischlings or quickly find another buyer to take the operation off their hands. Then again, I suppose if I could predict the banks with 100% accuracy, I'd have a lot more money than I do now!

The company that employed my father for quite-a-number of years filed Chapter 11 in either 2000 or '01. Ultimately, one of the partners in the original corporation and the largest creditor, a supplier, formed an LLC that got control of the company. The other two partners got wiped out. One had a pilot's license and got a job with an airline while the other was eventually hired back as a consultant, though he passed from lung cancer a few years later. Dad always said bankruptcy trustee would be a great job if you could get it because that person makes out like a bandit.

Why anyone loaned Steel City money to overpay for these stations, when the challenges radio is experiencing are well known, is a mystery. I don't see them settling for less than getting most of the note repaid or foreclosing on the assets. No idea who might be a buyer.

Steel City put out a press release yesterday, quoted in Tom Taylor's newsletter. Here's a link to the release:

https://www.prnewswire.com/news-rel...o-strengthen-its-balance-sheet-300617643.html

It sounds like they intend to find a way to recapitalize and retain all assets.

umfan said:

Why anyone loaned Steel City money to overpay for these stations, when the challenges radio is experiencing are well known, is a mystery. I don't see them settling for less than getting most of the note repaid or foreclosing on the assets. No idea who might be a buyer.

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For that to happen the bank would have to be pretty confident that a buyer could be found
who would be willing to pay more than they would get from a negotiated settlement. In the
current environment, I'm not so sure about that.

FreddyE1977 said:

In the
current environment, I'm not so sure about that.

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I think you're right. This is a different situation from iHeart and Cumulus, in that this is a family business, a second generation station owner who appears to be having a tough time adjusting to some things.

It's always tough in a family business because you have that tie to the parents or grandparents
who founded it. That surely explains why KQV hung in with the all-news format for as long as they did. Cheryl Scott did not want to let her father's vision die, and when she did, her brother finally
decided he could not longer keep things afloat.

Speaking of KQV, that is an option for station owners who find themselves in this situation.
Simply say "sayonara" and turn off the transmitters. The audience will wander away, and the value
of the station will start dropping like a rock. Talk about putting the bank under pressure to negotiate!

FreddyE1977 said:

Speaking of KQV, that is an option for station owners who find themselves in this situation.
Simply say "sayonara" and turn off the transmitters. The audience will wander away, and the value
of the station will start dropping like a rock. Talk about putting the bank under pressure to negotiate!

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Not sure if they can do that under the terms of Chap 11.

TheBigA said:

Not sure if they can do that under the terms of Chap 11.

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No but things could......[ahem]......."happen" at the transmitter site.

I know a guy whose brother went to prison for trashing his house just before
the bank foreclosed on it. Probably not such a great idea after all.

FreddyE1977 said:

For that to happen the bank would have to be pretty confident that a buyer could be found
who would be willing to pay more than they would get from a negotiated settlement. In the
current environment, I'm not so sure about that.

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The alternative would be settling for next to nothing. It'll come down to if they can limit concessions to the figure they estimate they could net from a sale of the stations if they have to foreclose. If the stations have net cashflow other than that going to debt service than the banks are likely to push hard to take as little a haircut as possible.

https://news.radio-online.com/cgi-bin/rol.exe/headline_id=b15639

Here is an update on Steel City media.

Steel City Media, owner of station clusters in Kansas City and Pittsburgh, has filed a plan of reorganization in Federal Bankruptcy Court in St. Louis to exit chapter 11. The plan which is consensual among the company and its significant financial creditors, calls for Steel City to exit bankruptcy with a new balance sheet and with the Frischling family retaining equity control of the company.

Steel City VP Michael Frischling stated, "In an environment where equity in radio companies is being wiped out, we are gratified that we have reached a consensual agreement with our creditors that enables us to maintain equity and operational control that sets the stage for future growth and profitability. We look forward to emerging from Chapter 11early next year and we want to thank our employees and advertisers for their continued support."

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umfan said:

Why anyone loaned Steel City money to overpay for these stations, when the challenges radio is experiencing are well known, is a mystery.

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Station values dropped precipitately during the 2008 recession and haven't recovered. Certainly not to the point they were prior to 2008. Assuming purchase of these stations occurred when groups were paying 7+ times cash flow to increase the size of their group, accumulating $25M in debt, wasn't unheard of at the time.