Radio giant Cumulus edges closer to bankruptcy
No. 2 U.S. radio company has halted efforts to restructure its debt
March 16, 2017
Berner looks to be headed into bankruptcy court again, this time as CEO of struggling radio giant Cumulus Media.
Over these past months, Berner has attempted to strike a deal with creditors to restructure Cumulus’s debt, roughly $2.4 billion.
Those efforts have now collapsed. Monday was the deadline for debtors to sign on for a stock-for-debt swap offer. Cumulus has terminated the offer, following a court ruling that blocked a key aspect of the plan.
Unless some white knight comes along, Cumulus has no choice but to file for bankruptcy protection.
It could come in a matter of weeks.
That Cumulus would file for Chapter 11 should come as no surprise. It’s been hemorrhaging losses, and Berner, who took over as CEO last September, has talked openly about the possibility in the event she couldn’t restructure its debt.
The real question is this: What will become of Cumulus’s assets, which include 454 stations in 90 markets, making it the second largest U.S. radio company after iHeartMedia?
One possibility: A major media player could jump in and buy up the entire company.
But the odds are against that. Radio has lost much as its cachet as a medium. Media investment dollars are flowing to digital and even out of home, not radio.
How it could all play out for Cumulus
More likely, assets will be sold off in pieces, market by market, for whatever they might fetch, and likely not for very much. Radio stations are now seeing multiples in the middle single digits, and in a fire sale they would go for even less.
Further dampening the market, iHeart also looks to be headed for Chapter 11 protection as it struggles with its own massive debt problems, $20 billion-plus. It too could be broken up, flooding the market with stations on the cheap.
But there could be a happy ending to this story, with small radio companies buying up stations from both Cumulus and iHeart, rebuilding them where necessary and running them well.
It would certainly be a boon for the new owners, but also for the radio industry, which has suffered for years with its two largest players cutting costs at the station level to manage their debts, to the chagrin of advertisers and media buyers, not to mention old radio hands.
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