Page 1 of 3 123 LastLast
Results 1 to 10 of 24

Thread: Another Cumulus debt bomb?

  1. #1

    Another Cumulus debt bomb?

    OK I get that Mary and company are credited with “saving” Cumulus, but is Cumulus worth saving? The old note holders took a severe “haircut” during the bankruptcy. The “new” Cumulus sold some valuable FM signals that they could not manage or program earlier this year to K-Love. I get Cumulus not being able to compete in the top markets and is becoming a sub top 20 market operator. Being the “big fish in small ponds” could be profitable if you can dominate in markets 20 -120. But if you read the press release from the WABC sale, Mary has (in my mind) spouted the “company line” which is not really what is happening financially. She said: “Consistent with our financial goals, we intend to use the sale's net cash proceeds to pay down debt and invest in the Company to better serve our 250 million listeners and the advertisers who want to reach them.*

    Cumulus went thru Bankruptcy and should have unloaded enough and restructure debt to be viable. IMHO working down debt is always a good thing Cumulus announced after the EMF sale and KLOS sales which together brought in $146.5 million that they had made a “voluntary prepayment of $115 million on its first lien senior secured term loan”. She also stated that they had reduced debt by $200 million since emerging from bankruptcy.** If my math is correct then Cumulus only generated $53.5 million above its regular required debt payment. Kind of a weak number but coming out of bankruptcy, but acceptable. But wait a minute, If Cumulus is retiring debt why did they takeout and “extra” $200 million during the June 12th *** note sale. Is this “lower interest money” due to their upgraded credit status and they are replacing some higher interest debt? All the statement said they increased the offering. Cumulus has around $100 million a year in “free” cash flow accord to Ms. Berner. Cumulus now has a half a billion debt bomb 6 or 7 years in the future. Will they actually use the unencumbered cash to prepay this debt or hope to find somebody to refinance? If Cumulus’s debt ($1.23 billion) goes up next quarter’s earnings statement without a significant increase in cash then I question the Cumulus business model.


    *https://finance.yahoo.com/news/cumul...185313044.html
    **https://finance.yahoo.com/news/first...132000586.html
    ***https://finance.yahoo.com/news/cumul...211716193.html

  2. #2

    Join Date
    Jul 2016
    Location
    Johns Creek, GA
    Posts
    19
    Given CMG selling to private equity, I have hard time believing the new CMG will not want to grow and could take some of Cumulus's portfolio.

  3. #3
    Quote Originally Posted by secondchoice View Post
    If Cumulus’s debt ($1.23 billion) goes up next quarter’s earnings statement without a significant increase in cash then I question the Cumulus business model.
    Why would the debt go up?

    My view on this whole thing is they're preparing the company for sale. That's what I expect to happen in the next few years.

  4. #4

    Join Date
    Jan 2006
    Location
    The ATL, OTP
    Posts
    3,611
    Maybe Cumulus needs to go back to being a small-market operator, which is where they got their early success, primarily by being the big fish in the little ponds. From what I have read, the Dickeys have admitted that they buggered up their large-market acquisitions, trying to achieve economy of scale and reduce redundancies but cratering the sales function in the process. We may see more divestitures in the biggest markets, including Atlanta. It's hard to put those pieces back together again. Fool me twice, shame on me.

    IIRC Carmike Cinemas ran into the same problem about a couple decades ago--they did well monopolizing theaters in small towns and being able to play hardball with Hollywood, but when they moved into larger markets via acquisitions that model didn't work anymore and they went broke.

    If the owners want to put a nice pretty bow on the company to sell as a going concern, then yes they need to get rid of as much debt as possible and make the rest of it manageable by not making it so dependent on large payments (including any nasty balloons down the road) and cutting interest rates. If they want to turn it into a glorified LBO and part it out, then the amount of debt they take on doesn't matter until the music stops (pun not intended) and the bankers get wise to what's happening--at least those not holding the bag and tempted to throw good money after bad. Remember if you owe the bank $100K you have a problem. If you owe the bank $100MM then the bank has a problem.
    "When broadcasting over the radio, there are certain words we must omit.
    Like 'BEEP' and 'BUZZ' and 'GOBBLE-GOBBLE', by gosh we can't even say shhhhhaving cream!"

  5. #5
    Quote Originally Posted by jabba17 View Post
    From what I have read, the Dickeys have admitted that they buggered up their large-market acquisitions, trying to achieve economy of scale and reduce redundancies but cratering the sales function in the process.
    You know the Dickeys aren't at Cumulus anymore?

  6. #6

    Join Date
    Jan 2006
    Location
    The ATL, OTP
    Posts
    3,611
    Quote Originally Posted by TheBigA View Post
    You know the Dickeys aren't at Cumulus anymore?
    Yes, but the New Cumulus is still stuck with many of their mistakes. How those get corrected is up to the new management.
    "When broadcasting over the radio, there are certain words we must omit.
    Like 'BEEP' and 'BUZZ' and 'GOBBLE-GOBBLE', by gosh we can't even say shhhhhaving cream!"

  7. #7
    Quote Originally Posted by jabba17 View Post
    Yes, but the New Cumulus is still stuck with many of their mistakes. How those get corrected is up to the new management.
    Seems to me the biggest mistake was buying Citadel. By selling off the ABC stations one by one, they're starting to correct that mistake. They still have a few more boat anchors to get rid of, including KABC and KGO.

  8. #8
    Quote Originally Posted by TheBigA View Post
    Why would the debt go up?

    My view on this whole thing is they're preparing the company for sale. That's what I expect to happen in the next few years.
    That could be, or maybe the sale of markets or groups of markets. I do agree with the person who started the thread that despite shedding some debt in bankruptcy, the current debt is too much for Cumulus to handle.

  9. #9
    Quote Originally Posted by RoddyFreeman View Post
    That could be, or maybe the sale of markets or groups of markets. I do agree with the person who started the thread that despite shedding some debt in bankruptcy, the current debt is too much for Cumulus to handle.
    If that was true, the judge would not have approved the deal. It would not be in the best interests of the creditors.

    Remember: The creditors own most of the company now, and they're making the decisions. And they want their money.

    When Cumulus bought Citadel, they only reason it was approved was because the creditors wanted the sale, rather than leave the post-bankruptcy company in the hands of Farid Suleman. They wanted their money immediately, rather than wait for the company to repay them.

  10. #10
    Moderator/Co-Administrator
    Join Date
    Jul 2003
    Location
    SoCal
    Posts
    38,840
    Quote Originally Posted by secondchoice View Post
    Will they actually use the unencumbered cash to prepay this debt or hope to find somebody to refinance? If Cumulus’s debt ($1.23 billion) goes up next quarter’s earnings statement without a significant increase in cash then I question the Cumulus business model.

    You are forgetting that the owners of Cumulus today are the lenders of yesterday who took equity in exchange for the "haircut". For the most part, they owe money to themselves.

    And, yes, the new financing replaces more expensive money with cheaper money. Just like a re-fi of a home.
    www.americanradiohistory.com
    Broadcasting Magazine and Yearbooks, Billboard, Cash Box, R&R, Record World, Music & Media, Audio, Television/Radio Age, R&R, Duncan's American Radio, Popular Electronics, Studio Sound, Broadcast Engineering, db, and more.

Page 1 of 3 123 LastLast

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

     
Useful Contacts
Community


123