Cumulus Media files Chapter 11 bankruptcy

Bankruptcy News

Cumulus Media Inc. Files Bankruptcy with “Ample Cash on Hand,” Not Seeking DIP Financing to Restructure $2.4 Billion Debt

Posted on December 1, 2017 at 7:45 pm by


New York, Nov. 29, 2017— Cumulus Media Inc. and 37 of its subsidiaries (“ Cumulus ” or the “Debtors”) filed petitions for Chapter 11 of the Bankruptcy Code on November 29, 2017 in the Southern District of New York under Case No. 17- 13381.[1]

The Debtors have employed the law firm of Paul, Weiss, Rifkind, Wharton & Garrison LLP as general bankruptcy counsel, Alvarez & Marsal North America, LLC, as restructuring advisor, PJT Partners LP as investment banker, and Epiq Bankruptcy Solutions, LLC as the notice and claims agent.[2]

Cumulus Media (OTCQX:CMLS) leads the radio broadcasting industry, operating 446 radio stations and reaching 245 million people weekly across 36 states and D.C.[3] Their Westwood One is the exclusive radio broadcast partner to the NFL, NCAA, the Masters, Olympics, GRAMMYs, Billboard Music Awards, and many more.[4] Westwood One syndicates sports, news, and entertainment content and services to approximately 8,000 other affiliated radio stations.[5] The Debtors syndicate content and exchange services for advertising time, which is the Debtor’s primary source of income.[6] In 2016, Columbus Media employed 5,479 people.[7]

The Debtors filed Chapter 11 Bankruptcy as part of their restructuring efforts for a business turnaround.[8] They have had “historical underperformance” after an aggressive expansion of $5 billion in acquisitions from 1998 to 2013.[9] According to their Executive VP and Chief Financial Officer, John F. Abbot, Cumulus did not have the management and infrastructure needed to integrate the acquired assets and entities.[10] Furthermore, they were not able to achieve the anticipated revenue from the new acquisitions to cover the prices paid.[11] Abbot emphasized the acquisition of Citadel Broadcasting and Dial Global combined with “industry pressures” the Debtors saw their performance deteriorate since 2012, experiencing decline in year-over-year performance in ratings and revenue.[12] Abbot defined industry pressures as decreasing demand for radio broadcasting from both listeners and advertising by the insurgence of digital streaming and internet-based digital outlets.[13] By 2015, Cumulus found itself with rapidly approaching maturity on loans and debt from high acquisition prices, changing industry landscape, and ensuing poor performance.[14]

President and CEO Mary Berner addressed the accumulating debt as a financial obstacle, “the debt overhang left by previous years of underperformance remains a significant financial challenge that we must overcome for our operational turnaround to proceed.”[15]

They started to consider restructuring options in 2015 and by December 2016 entered into a refinancing agreement with loan holders.[16] The Debtors launched a private exchange offer but it was terminated March 2017 after the Southern District court of New York denied their motion requiring the administrative agent to consent with the proposed financing.[17] On September 26, 2017 the Debtors held meetings with Ad Hoc Groups of lenders and senior note holders with restructuring proposals who in turn responded with their own restructuring proposals by October 2017.[18] These and subsequent negotiations throughout October allowed Cumulus to forego their scheduled payment of $23.6 million on interest of senior notes due November 1st.[19]

As of the joint filings, the 37 debtor entities owed $2.4 billion of aggregate principal debt to 30,000 creditors.[20] On November 29, 2017, Cumulus executed a Restructuring Support Agreement (RSA) with consenting term loan lenders holding about 69% of the term loans. The RSA entails the following for creditors and equity holders,

  • Term Loans. Holders of Term Loan claims will receive, in full and final satisfaction, compromise, settlement, release, and discharge of and in exchange for such Term Loan claim, their pro rata share and interest in:
  • $1.3 billion in principal amount of first lien term loans (the “New First Lien Debt”), to be deemed borrowed by Reorganized Cumulus pursuant to the Chapter 11 Plan on the Effective Date.
  • 5% of the issued and outstanding amount of the sole class of equity to be issued by Reorganized Cumulus (the “Reorganized Common Equity”), subject to dilution on account of the Post-Emergence Equity Incentive Program.
  • 7.75% Senior Notes and Other General Unsecured Claims. Each holder of an allowed 7.75% Senior Notes Claim and General Unsecured Claim will receive its pro rata share and interest (calculated based on the aggregate amount of allowed Senior Notes Claims and allowed General Unsecured Claims) in 16.5% of the Reorganized Common Equity, subject to dilution on account of the Post-Emergence Equity Incentive Program (the “Unsecured Equity Recovery Pool”).
  • Equity Interests in Cumulus Media Inc. On the Effective Date, each holder of an allowed equity interest in Cumulus Media Inc. shall receive no distribution on account thereof and each such interest will be cancelled.[21]

Thus the secured lenders holding 69% of the Debtor’s term loan agreed to reduce Cumulus debt by 1.3 Billion.[22]

The Debtors did not seek Debtor-In-Possession (DIP) financing because, according to Berner, “[w]e have ample cash to support our operations and service our advertisers, vendors and affiliates during this period…”[23]

She expressed accolades to the company and their employees for the continuing improvements since negotiations then, and offered forward looking statements for their employees, stakeholders, and the public,

The actions we are taking today to address our balance sheet are a critical step forward for Cumulus. We will use this restructuring process to relieve the financial constraints on our continued progress, allowing us to focus our resources on investing in our business and people to strengthen our competitiveness and ultimately drive growth. We appreciate the tremendous efforts of the Cumulus team throughout the business turnaround and thank our employees for continuing to be the true force driving our success.[24]

Cumulus set up a FAQ page in their website and offered additional court information through Epiq, http://dm.epiq11.com/cumulus.

The list of the 37 subsidiaries and debtor entities are as follows:[25]

  • Cumulus Media Inc.
  • Atlanta Radio, LLC
  • Broadcast Software International
  • Catalyst Media, Inc.
  • Chicago FM Radio Assets, LLC
  • Chicago Radio Assets, LLC
  • CMI Receivables Funding LLC
  • CMP Susquehanna Corp.
  • CMP KC Corp.
  • CMP Susquehanna Radio Holdings Corp.
  • Consolidated IP Company LLC
  • Cumulus Broadcasting LLC
  • Cumulus Intermediate Holdings Inc.
  • Cumulus Media Holdings Inc.
  • Cumulus Network Holdings Inc.
  • Cumulus Radio Corporation
  • DC Radio Assets, LLC
  • Detroit Radio, LLC
  • Dial Communications Global Media, LLC
  • IncentRev-Radio Half Off, LLC
  • IncentRev LLC
  • KLIF Broadcasting, Inc.
  • KLOS-FM Radio Assets, LLC
  • LA Radio, LLC
  • Minneapolis Radio Assets, LLC
  • NY Radio Assets, LLC
  • Radio Assets, LLC
  • Radio Metroplex, Inc.
  • Radio Networks, LLC
  • San Francisco Radio Assets, LLC
  • Susquehanna Media Co.
  • Susquehanna Pfaltzgraff Co.
  • Susquehanna Radio Corp.
  • WBAP – KSCS Assets, LLC
  • Westwood One, Inc.
  • Westwood One Radio Networks, Inc.
  • WPLJ Radio, LLC

 

Cristina Lipan is a bankruptcy attorney and partner with the law firm of Shipkevich PLLC. Cristina is admitted in the Southern and Eastern Districts of New York and regularly practices before the United States Bankruptcy Court. For more information on this matter, you can reach Cristina at  646-867-0098 or at  clipan@shipkevich.com

 


 

  • [1] Voluntary Petition for Non-Individuals Filing for Bankruptcy, Doc. No. 1, Case No. 17- 13381, S.D. N.Y. Filed November 29, 2017 (the “Petition”).
  • [2] Petition, Retention of Professionals (No. 17- 13381).
  • [3] Declaration of John F. Abbot In Support of Chapter 11 Petitions and First-Day Motions, Doc. No. 17, Case No. 17- 13381, S.D. N.Y. Filed November 29, 2017, (the “Declaration of John F. Abbot”), ¶¶ 7-9.
  • [4] Declaration of John F. Abbot, ¶ 17.
  • [5] Declaration of John F. Abbot, ¶ 8.
  • [6] Declaration of John F. Abbot, ¶ 20.
  • [7] Declaration of John F. Abbot, ¶ 27.
  • [8] GlobalNewsWire.com, Cumulus Enters Restructuring Support Agreement to Reduce Debt by Over $1 Billion, November 29, 2017, https://globenewswire.com/news-release/2017/11/30/1210688/0/en/Cumulus-Enters-Restructuring-Support-Agreement-to-Reduce-Debt-by-Over-1-Billion.html (The “Press Release”).
  • [9] Declaration of John F. Abbot, ¶ 58.
  • [10] Declaration of John F. Abbot, ¶ 58.
  • [11] Declaration of John F. Abbot, ¶ 58.
  • [12] Declaration of John F. Abbot, ¶ 58.
  • [13] Declaration of John F. Abbot, ¶ 60.
  • [14] Declaration of John F. Abbot, ¶ 60.
  • [15] Press Release
  • [16] Declaration of John F. Abbot, ¶ 62
  • [17] Declaration of John F. Abbot, ¶ 62.
  • [18] Declaration of John F. Abbot, ¶ 66.
  • [19] Declaration of John F. Abbot, ¶ 69.
  • [20] Declaration of John F. Abbot, ¶ 78.
  • [21] Declaration of John F. Abbot, ¶ 71.
  • [22] Press Release
  • [23] Press Release
  • [24] Press Release
  • [25] Petition, Rider 1 (No. 17- 13381)
  • Image Credit: On Air by Michael Claisse via CC Licensing
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