CEO Mary Berner expects the company to come out a meaner, leaner company by May and it’s business as usual at the station level. Market Managers we spoke to Thursday said it is business as usual and they feel pretty good about things because of the transparency in the corporate office. So what’s next?
Because this isn’t quite a pre-packaged Chapter 11 filing (one lawyer told is it’s called a pre-arranged filing with a cram-down) not everyone on the debt side has signed on. Junior lenders have to decide whether it’s worth their time and money to fight what they’re getting, or sign on and take whatever they get. Of course, investors get nothing. Their stock is worth zero.
Critical vendors like Nielsen will probably work with Cumulus to be paid, according to one lawyer we spoke to (Nielsen did not respond to our question: ‘Will you continue to provide ratings to Cumulus being they are so far behind on their bill?). Cumulus needs the ratings, especially in the larger markets the company says are starting to make a turnaround. The court document says Nielsen is owed millions of dollars.
We took a look at the 118-page court filing where CFO John Abbot details exactly how Cumulus put itself in such an awful position.
Abbot says between 1998 and 2013, Cumulus Media completed approximately $5 billion worth of acquisitions to grow its network and station businesses, with the largest being the acquisition of Citadel in 2011. He says the company struggled to develop the management and technology infrastructure required to integrate the acquired assets and to support and manage its expanding portfolio. “Additionally, certain of the acquisition projections proved erroneous and a number of subsequent management decisions failed to achieve their desired results. The Company was thus unable to achieve the cash flow projections it had made to support the prices paid for those acquisitions, particularly the Citadel Broadcasting acquisition in 2011 and the Dial Global (now Westwood One) acquisition in 2013, with the underperformance resulting in leverage levels significantly in excess of original projections. Additionally, those factors, in concert with industry pressures, also caused its performance to falter such that from 2012 forward the Company experienced declining year-over-year performance in ratings, revenue and Earnings Before Interest Taxes Depreciation and Amortization.”
The CFO goes on to say that in addition to Cumulus’ historical underperformance, advertiser and listener demand for radio overall was negatively impacted by the availability of content and advertising opportunities on the digital side, resulting in declines in radio industry revenue and listenership. “As a result of these general industry pressures, high acquisition prices and subsequent poor performance, Cumulus Media found itself with an excessive level of debt relative to its earnings and rapidly approaching maturities on its funded debt.”
On Monday, we’ll have an interview with a legal analyst and get his take on how this may play out over the next 6 months.
From Here:
Quite so, Peter.
Corporate radio has had no idea how to be more appealing to audiences and more effective for advertisers.
They suck at it, and this has been the case for decades.
More aggressive, although useful, sales approaches still won’t be the difference that makes the difference.
The meaningless smoke & mirror mewlings being blurted from Cumulus management could as likely be coming from, say, The White House.
“the company struggled to develop the management and technology infrastructure required to integrate the acquired assets and to support and manage its expanding portfolio.”
So what makes anyone think that they now have miraculously acquired these skills?
They changed their CEO, who has now hired specialists in those areas. The previous CEO wanted to do it all himself. The problem is they can’t make new investments because of the previous CEO’s debt. It’s all explained in the filing.