Twenty-two days ago, $17 million was due from Audacy Inc. to cover an interest payment associated with a credit facility that commenced some seven years earlier. To date, this payment has not yet been made, with extensions granted by the lenders.
On Sunday, the company formerly known as Entercom entered into a fresh Credit Facility Amendment, stretching the due date of that interest payment and another lesser payment by another week.
According to a SEC filing, Audacy extended to 21 days from 14 days the time it has to deliver the $17 million, which was originally due on October 31.
Concurrently, approximately $785,592 was originally due on November 8. An extension to 21 days from 14 days from that date was also agreed upon between Audacy and the lenders.
Given the timeframe, another update from Audacy could arrive as early as Friday, if not November 27, following the Thanksgiving Day holiday weekend.
The actions surrounding the Credit Facility Amendment led Audacy to adjust its Receivables Facility Amendment it holds with Frankfurt, Germany-based DZ Bank. This amends any cross-default threat should Audacy fail to make the $17 million and/or $785,592 payments within the timeframe necessary to avoid a default.
As RBR+TVBR originally reported in July 2021, Audacy engaged in a “trade receivables securitization,” designed to give the company led by President/CEO David Field and founded by his father, Joseph Field, a significant influx of cash. Specifically, $75 million was to be pumped into Audacy’s bank accounts through the three-year facility.
What is a trade receivables securitization? PNC Financial Services Group describes it as “a lower cost source of revolving debt.” That’s because it involves asset-backed financing. Accounts receivable securitization is normal among big companies whose customers have good credit ratings, one financial services executive tells RBR+TVBR. In the simplest terms, it is a cheap and reliable source of working capital financing.
In the case of Audacy, trade receivables securitization involves the collaterization of the company’s billed — and unbilled receivables — for radio and podcast advertisements. This resulted in lower interest, but relied on the performance of its market-by-market sales executives to help fuel its dollar influx. Yet, the arrangement is fundamentally based on the creditworthiness of the Audacy customers to whom those invoices are expected to be sent to at the end of each month — not on Audacy itself.
At the time the trade receivables securitization was announced, Audacy shares, then-trading on the NYSE, were priced at $3.4250 — marking a fresh six-month low for the company. Today, the company has been booted from the exchange, even after its board of directors approved a 1-for-30 stock split designed to regain compliance with the NYSE.
Getting on an exchange other than the OTC will remain elusive for Audacy for some time, as shares entered the Thanksgiving Day holiday down 3 cents to just $0.2910 as of 2:41pm Eastern.
The interest payment issues for Audacy first surfaced in early October, when the company elected to use a 30-day grace period for the cash interest payment of approximately $18 million due on September 30 to holders of its 6.75% senior secured second-lien notes due March 31, 2029.
At the time, Audacy intended to use the grace period “to continue its dialogue with lenders regarding a potential plan to strengthen its capital structure to support Audacy’s strong operating business and position Audacy for long-term growth.”
Field elaborated, noting, “We continue to engage in discussions with our lenders as we execute on our overall growth strategy and remain focused on investing in our people, platform, content and technology capabilities to serve our listeners and customers. We continue to drive progress across our key performance metrics, meaningfully advance our ad tech and product roadmap and enter new partnerships to enhance content, distribution and monetization opportunities.”
Now, all eyes are on Field as Audacy navigates through its biggest fiscal challenge to date.
