The FCC, as expected, has approved of Audacy Inc.’s plan to emerge from debtor-in-possession status — a move that makes Soros Fund Management the controlling interest holder in the audio content creation and distribution company founded by the Field family.
While the release of the Commission’s Memorandum Opinion and Order came early Monday, it was adopted in a divisive 3-2 vote on September 18, with Republicans Brendan Carr and Nate Simington vociferously disapproving the deal over Soros’ ties to liberal and Democratic causes.
Timing of the Memorandum Opinion and Order’s release comes as Audacy’s Debtor-in-Possession Forbearance Agreement was scheduled to expire today, after an extension granted by Houston-based U.S. Bankruptcy Judge Christopher Lopez in mid-August.
Lopez approved all of the necessary paperwork to allow Audacy Inc. to emerge from Chapter 11 bankruptcy on February 20.
For seven months, the FCC had been waiting on delivering what many predicted would be a 3-2 vote in favor of the Audacy post-bankruptcy reorganization plan, which sees former debt holders of Audacy Inc. receiving new common stock in the reorganized company — an organization that some conservative Republicans believe will be unduly influenced by George Soros through his fund’s investment in the owner of such all-News stations as KNX/Los Angeles, KCBS/San Francisco, WBBM/Chicago, WINS/New York and KYW in Audacy’s home of Philadelphia.
Then, there is the ownership structure post-bankruptcy, which has come under intense scrutiny from Carr and Simington, in particular. With the 3-2 approval by Democrats on the Commission, Audacy has won a temporary and limited waiver of section 1.5000(a)(1) of the FCC’s rules to permit it to emerge from bankruptcy before filing a Petition for Declaratory Ruling that would seek approval for the reorganized Audacy to have aggregate foreign ownership in excess of 25%.
In its 3-2 decision, the Commission approved “the same two-step approval process requested by previous broadcast and common carrier wireless licensees emerging from bankruptcy that have foreign debt-holders” — the FCC’s OK of the Application with certain restrictions on potential foreign ownership interests among the special warrant holders in order to comply with the 25% foreign ownership interest threshold contained in section 310(b) of the Act, and then within 30 days of the proposed restructuring ensuring its filing of a petition for declaratory ruling seeking approval of any foreign ownership interests in excess of 25% of the reorganized company.
In doing so, the Democratic majority on the Commission denied an informal objection to the Audacy plan filed as a Petition to Deny from Media Research Center — the Conservative watchdog group founded in 1987 by L. Brent Bozell III. “We find that MRC fails to demonstrate that it has standing in this proceeding,” the Commission determined.
The FCC also considered a comment received from Ira Warren Patasnik filed two months after the filing window as an informal objection to the Application. Ultimately, it “fails to satisfy any of the necessary elements” of a Petition to Deny the deal.
WHAT’S NEXT FOR AUDACY
In February, Judge Lopez confirmed Audacy’s reorganization plan, which sees the company canceling some $1.6 billion of its existing debt. In exchange, it is issuing securities in the newly reorganized Audacy that will emerge from debtor-in-possession status through a combination of Class A and Class B common stock and pre-paid special warrants carrying no voting rights, with limit exercise rights.
Substantially all of Reorganized Audacy’s voting stock will be held by new shareholders.
As a result of the exchange of debt for securities, Laurel Tree Opportunities Corporation is expected to hold a controlling, attributable interest in the reorganized company, holding 57% or greater of the Class A New Common Stock of the reorganized Audacy.
The sole voting shareholder of Laurel Tree will be FPR Capital.
Fund for Policy Reform holds 100% of the voting and equity interest of that entity and is governed by a four-member board of trustees, all of whom are U.S. citizens: Leonard Banchon, Maryann Canfield, Alexander Soros, and Michael Vachon.
ROYAL WIN
A continuation of the Local Radio Ownership Rule previously granted for Audacy in Kansas City has been granted by the Commission as part of its emergence from debtor-in-possession status.
