Cumulus station trade round up April 2019

https://news.radio-online.com/cgi-bin/rol.exe/headline_id=b15804

The Big one is an agreement to sell KLOS-FM Los Angeles Meruelo Media as mentioned on the Los Angeles Board.



Another part of this trade includes Connoisseur Media in talks with Cumulus. This is where Cumulus gets WODE-FM, WWYY-FM, WEEX-AM and WTKZ-AM in Allentown, PA.

Connoisseur Media gets WEBE-FM in Westport, CT, and WICC-AM in Bridgeport, CT. Note the Connoisseur and Cumulus talks take into effect on May 1st via LMA.

DavidEduardo said:

WABC goes to WNYC to improve the signal on AM of the non-com.
KABC goes to Lotus to simulcast the signal impaired 670 for the Persian community.

Click to expand...

They still haven't sold the WABC tower property on Rt 46 yet. Access isn't the best, but it's still worth a lot.

They'd probably want to sell the real estate before dealing the station?

DavidEduardo said:

So now the AMs in NYC and LA are orphaned.

I think they will be sold.

My guess:

WABC goes to WNYC to improve the signal on AM of the non-com..

Click to expand...

That would be some signal for a noncomm! Are there currently any 50kw AM full power day-and-night public radio outlets in the US?

Now, the $64,000 question - is Cumulus done selling FM properties???

Everything sold so far pretty much falls into the low hanging fruit category. All of the FM stations traded or sold consist of weak or semi-weak cash flow generators who are proverbial bench warmers in their respective markets. Ready buyers were lined up. In the case of the NYC - Washington - Atlanta transactions, a highly attractive cash flow multiple was paid to Cumulus.

In the case of KLOS? My guess is the multiple was decent, not great. Probably 6x - 7x.

There are probably other markets where Cumulus could fetch a multiple in the ballpark of 7x. It seems to me a deal with Hubbard involving stations in Minneapolis, Chicago and Washington could be a realistic possibility.

Detroit is a market ripe for consolidation. Cumulus and Urban One are two very weak players. Beasley, Entercom and iHeart all have strong clusters. Beasley only has three stations total (all on FM), and all frequently finish in the top 5 or top 6 in Adults 25-54. I have no idea if Beasley has dry power to burn or access to capital to support further acquisition activity, though. My guess is they'd need to pony up $50 million in cash or other consideration to scoop up WDVD, WDRQ and WJR (yes, $50 million total for all three stations).

I think Cumulus would be willing to unload KRBE in Houston, too, but only for the right price. That's a station they'll be happy to sit on for a while.

MarkW said:

Now, the $64,000 question - is Cumulus done selling FM properties??

Click to expand...

First of all, the creditors own 87% of the company. So they're involved in these decisions. Obviously, quick cash is great for the creditors.

But the second issue is they still have about $1 billion in debt to pay off. The more major market assets they sell, the harder it will be to pay off the remaining debt. So they have to balance the quick cash with the long terms revenue and cash flow that can be used to continue to pay off the debt. They have said publicly that they're very happy with the Chicago, Detroit, and Houston clusters. But by the same token, we have seen that they have no emotional attachment to any assets. Everything's on the table. So that's the conundrum.

DavidEduardo said:

So now the AMs in NYC and LA are orphaned.

I think they will be sold.

My guess:

WABC goes to WNYC to improve the signal on AM of the non-com.
KABC goes to Lotus to simulcast the signal impaired 670 for the Persian community.

Click to expand...

An interesting and bold prediction that I wouldn't discount given your background David. We have been hashing around topics like this for many years! How about this: iHeart sells Directional WOR-710 to pick up Non Directional WABC? Would it be worth it to them?

I think KLOS went for a combination of stick value and billing. I don't think they were cash flowing $4 to $5 million, as that would be a margin of 45% to 50% on billings.

Click to expand...

Wow - billing was weaker than I even thought! Those are putrid figures in a market as large and as wealthy as southern California given the longevity of the KLOS brand.

Evidently, the bar is high from a cash flow multiple standpoint for Cumulus to be a wiling seller.

They have said publicly that they're very happy with the Chicago, Detroit, and Houston clusters.

Click to expand...

Talk - especially of the "public" variety - is cheap. In Detroit, WJR's ratings are on a general decline (billing remains healthy but has no upside), WDRQ is a total dumpster fire, and WDVD is just a so-so revenue performer relative to ratings. I have little doubt KRBE in Houston remains a strong performer.

Chicago - like Detroit - is another market where Cumulus stations command only a small percentage of total radio ad dollars. However, recent changes in the market would suggest to me there is room to grow 94.7 WLS-FM's billing. I'm not sure about Q101 - they are probably stuck in neutral. Cumulus has put a lot of effort into retooling 890 WLS in recent years (they are now on the second or third such retooling), so evidently they think there is still an opportunity to resuscitate that station and improve its performance. I'm deeply skeptical. Once an AM station's audience flees, it is very difficult to get those listeners back, regardless of how many programming changes are made.

MarkW said:

I'm deeply skeptical. Once an AM station's audience flees, it is very difficult to get those listeners back, regardless of how many programming changes are made.

Click to expand...

If what you say is true, then there will be no demand for those signals. At least not at the price required to make a deal. One thing to know about Chicago and Detroit: Given the number of national advertisers in those two markets, Cumulus would continue to have offices in those cities even if they didn't own stations there. Owning those stations at least covers the basic expense of those sales offices. Same with NY and LA. So their needs in those markets are different from locally based owners.

There's always the possibility that they donate the signals to some non-profit. The company could use a write off at this point. Might actually be better than getting cash for them.

AMRocks said:

There's always the possibility that they donate the signals to some non-profit. The company could use a write off at this point. Might actually be better than getting cash for them.

Click to expand...

Nice idea but the expense of running them is more than most non-profits can handle. iHeart tried that a few years ago, and it didn't work out.

David - you have always been pretty willing to share your take/guess on sales and profit of stations over the years. (BigA, too?) What would you think about WPLJ and KLOS? BigA, how does/can Cumulus recover the billion plus needed in revenue to cover this debt? Virtually impossible/improbable at this point?

DavidEduardo said:

KLOS increased billing last year, while the LA market decreased. This was in part due to the loss of The Sound. I am making a very weak guess based on no evidence that they cash flowed around $4 to $5 million last year, up from perhaps $3 to $4 million the prior several years. Sales were in the $13 to $14 million zone.

WPLJ was off so much in revenue in 2018 (less than half the level of 5 years previous) that they likely were very marginal in profit... maybe $2 to $2.5 million on under $10 million in revenue.

The two sales they made reduce debt by about $100 million if used for that... about 10% of debt. By focusing on markets where they can improve performance, this was likely the best step. Remember, the former creditors own the group, so they are acting in their own best interest to pay off the remaining debt.

Click to expand...

Very good info. I think you are accurate on all of this. (Faithfully Signed, your other favorite Smart@$$) - been a long evening. Nite, sir!

Given the number of national advertisers in those two markets, Cumulus would continue to have offices in those cities even if they didn't own stations there. Owning those stations at least covers the basic expense of those sales offices. Same with NY and LA. So their needs in those markets are different from locally based owners.

Click to expand...

I am not sure I follow your logic here, BigA.

There is plenty of available office space in Metro Detroit, mostly in the suburbs. Operating costs for, say, a 3,000 sf suite to serve as a national sales office are not terribly expensive. The advertising sold by such office's account execs should justify the expense. If national ad sales generated from the Detroit office are insufficient to generate an acceptable contribution to the bottom line, then the office has no reason to exist.

The perceived need to have national account execs on the ground in Detroit should not dissuade Cumulus from turning down any offer from a would-be buyer to purchase Cumulus' stations at an attractive multiple to Broadcast Cash Flow. Of course, who the heck knows if any such buyers are actually out there.

MarkW said:

The perceived need to have national account execs on the ground in Detroit should not dissuade Cumulus from turning down any offer from a would-be buyer to purchase Cumulus' stations at an attractive multiple to Broadcast Cash Flow. Of course, who the heck knows if any such buyers are actually out there.

Click to expand...

That's the point. Everyone knows Cumulus is a seller, but so far there haven't been many buyers. I never said they would turn down great offers from potential buyers. So my point is Cumulus is in no rush to sell, especially in markets where they already have offices. As a result, they don't have to accept ANY fire sale offer. Owning the stations in those markets guarantee the spots will air in the key sales markets of Detroit and Chicago without having to buy clears on competitor stations. They can wait for the best offer to come in.

WPLJ and WYAY has been mentioned to get a format flip on May 31st as EMF takes over those stations from Cumulus.