Spanish Broadcasting System, the radio broadcasting company that also serves as the parent for MegaTV, the LaMúsica digital app and its Aire Radio Networks national audio arm, will come under majority control of non-U.S. based financial investors once it emerges from bankruptcy.
That’s at least what SBS is requesting from the FCC. And, that has generated an opposition from a party who also wants the Commission to retain the current Spanish-language programming on the stations once the ownership change at SBS has transpired.
At question is the issue of governance of SBS, and it is one that may be unclear in the filings presented to the Commission by SBS through its legal counsel at Lerman Senter on behalf of company Legal Counsel and Chief Operating Officer Richard Lara.
Petitions to deny a Petition for Declaratory Ruling to transfer control of SBS to “certain funds and accounts” managed by Brigade Capital Management L.P., were submitted to the Commission by John “Gungie” Rivera and the Latin Advocacy Media Project (LAMP), respectively.
Rivera is the CEO of Rivera Marketing and Media Group who began his career as a DJ in the 1980s and would later become a nightclub owner and promoter. This led to his own Sony Music-distributed record label, Prestigio, which was folded in 2007 following the death of his six-year-old son to a rare pediatric brain tumor. More recently, Rivera has created a youth get-out-the-vote campaign, “Salsa the Vote,” and since 2009 has directed the Cristian Rivera Foundation, to raise awareness and research toward pediatric brain tumors such as that suffered by his young son.
LAMP is self-described as a civic and social justice framework focused on Latino representation, rights education, coalition-building, and public engagement.
As Rivera and LAMP see it, SBS “attempts both to evade and minimize the critical issues raised before the Commission by SBS’s Amended and Restated Petition for Declaratory Ruling.”
With sole practitioner James A. Cueva, whose address is a Regus office suite in Coral Gables, Fla., representing Rivera and LAMP, he seeks to establish with the Commission that SBS and its FCC licenses “represent a unique and treasured Latino cultural institution.” This was echoed by the Hispanic Marketing Council in its own ex parte filing expressing concerns over a post-bankruptcy SBS.
Rivera and LAMP also claim that SBS’s creditors “are already exercising de facto control” while the company “fails to explain how the present record supports its proposed foreign ownership structure,” a request that requires Commission scrutiny.
An ECFS filing posted Tuesday (10/27) offers this; prior communication to the FCC was dismissed by SBS counsel at Lerman Senter who include Nancy Ory on the grounds that it was procedurally defective and failed to meet document format and content requirements.
Nevertheless, Ory and her team representing SBS made it clear to the Commission that it seeks its permission “to complete essential restructuring of its current debt obligations which has been approved by a Delaware federal Bankruptcy Court.” And, the objectors “mount a scattershot attack, raising many conjectural allegations by which they seek to delay FCC approval, or obtain denial,” of the transfer of control applications “based on vaguely articulated public interest grounds.”
Extended proceedings, the Lerman Senter legal team add, would create a “significant delay” with any extended proceedings and therefore impact its ability to continue to operate as a going concern, “fundamentally undermining the result” that LAMP and Rivera seek: the preservation of current SBS station formats and programming.
But, their allegations, SBS’s legal defense states, “are either speculative assertions that demonstrate no inconsistency with the Commission’s rules or precedents” favoring grant of the transfer applications or “lie entirely outside the scope of Commission review” — namely a condition on a license transfer that programming or content be retained, which would create myriad issues with respect to the FCC and its authority.
FOREIGN-BORN CONTROL IN QUESTION
While content enforcement has never been seen from the FCC, Rivera and LAMP content that SBS “intentionally avoids addressing that two foreign creditors will control the board.”
This, Lerman Senter attorneys contend, is “premised on the faulty notion that the proposed SBS reorganization portends a suspect transfer of control” of SBS to what the opposition calls “majority foreign, financially motivated ownership.”
What, then, is the ownership composition of post-bankruptcy SBS? “U.S. investment management companies that operate funds that hold SBS debt” that have organized or otherwise manage investment entities organized in jurisdictions other than the United States.
“This has no bearing on the identity and citizenship of the specific investors in each fund,” Lerman Senter contends.
That said, the Man Group-associated entities that will hold ownership in SBS are neither U.S. based nor U.S. controlled. Not to worry, Lerman Senter’s attorneys note — Connoisseur Media, MediaCo’s Estrella Media and TelevisaUnivision backer Searchlight II HMT LLP each won the FCC’s regulatory OK with similar structures, and they are “routine and commonplace,” Ory and her team note.
The bankruptcy agreement approved earlier this year by the Delaware federal court paved the way for SBS to satisfy its obligations to subsidiaries of Man Group plc and Bayside Capital LLC holding more than 72% of the outstanding principal amount of SBS’s 9.75% Senior Secured Notes due 2026. That was debt Spanish Broadcasting System could not timely repay, leading to the bankruptcy. And, Ory and her team state, had an agreement with the creditors not been reached, a Chapter 7 involuntary bankruptcy for SBS would have been the result.
