As RBR+TVBR first reported on Sunday (1/7), audio content creation and distribution company Audacy Inc. has reached an agreement with a “supermajority” of its debtholders on a financial restructuring that the company founded as Entercom believes “will significantly deleverage Audacy’s balance sheet and further position Audacy for long-term growth.”
The voluntary Chapter 11 filing, which was largely expected, is designed to resolve Audacy’s $1.9 billion in debt. To do it, Audacy shareholders that don’t cash out now stand to lose out on their entire investment. This sent shares tumbling further on Monday.
Meanwhile, it became known that Audacy, headquartered in Philadelphia, did not file for bankruptcy in Pennsylvania but, instead, in Texas.
Among the many questions some may have regarding Audacy’s restructuring plan is why, of all venues, the company selected the United States Bankruptcy Court for the Southern District of Texas to overseeing its bankruptcy case.
According to an Audacy representative, it comes down to ownership of stations in Houston, where the court is based. “We do business in Texas, our corporate structure allowed us to file there, and we believe Texas is the best venue for us,” the company spokesperson said.
The Texas venue also happens to be one of the top three destinations for big corporate debtors’ Chapter 11 filings in the U.S., along with Wilmington, Del., and the City of New York, Reuters reports. But, a case search in PACER offers a deeper explanation as to how Philadelphia-based Audacy can file in Texas, too. Some 41 case numbers associated with Sunday’s bankruptcy filing appear, each reflecting individual limited liability companies with Audacy Inc. as the parent. Among them is Audacy Texas, LLC.
From a financial standpoint, the filing wasn’t cheap. Each one bears a fee of $1,738. As such, $71,258 was spent on filing fees alone.
Just one day after the early Sunday bankruptcy filing, Bankruptcy Petition # 24-90004 has seen a flurry of docket activity, with the case assigned to Judge Christopher M. López. He rose to prominence in October 2023 after picking up cases following the sudden resignation of Judge David Jones. Jones’ decision came following an ethics probe initiated by a federal appeals court that examined his failure to disclose an established, lengthy romantic relationship with an attorney whose firm had several cases before his court.
López has already received a slew of submissions Audacy’s legal representatives from Porter Hedges LLP‘s Houston office and the two members of the U.S. Trustee’s Houston office.
Among the documents submitted to López’s court:
- A request from Audacy Inc. to employ Epiq Corporate Restructuring as its claims, noticing, and solicitation agent. López agreed to the request.
- A proposed order to maintain Audacy’s insurance program and its cash management system
- An order granting “complex” Chapter 11 bankruptcy case treatment
Another key component of Audacy’s bankruptcy petition is the “Ad Hoc First Lien Group” pursuant to bankruptcy rule No. 2019. This group is represented by Gibson, Dunn & Crutcher and by Texas co-counsel Howley Law PLLC.
Members of this first lien group of debtholders are:
- PGIM, Inc., as investment advisor, subadvisor and/or
collateral manager - Mockingbird Credit Opportunities Company LLC
- Goldman Sachs Asset Management, L.P. (not as principal)
- Goldman Sachs Asset Management B.V.
- MJX Asset Management LLC
- Sound Point Capital Management, LP
- Solus Alternative Asset Management LP
- Certain funds or accounts managed, advised, subadvised or affiliated with Cross Ocean Partners Management LP
- Benefit Street Partners LLC
- Columbia Cent CLO Advisers, LLC
- Blue Owl Liquid Credit Advisors, LLC, on behalf of certain funds and accounts
- SI Capital Commercial Finance LLC
- Lakestar Finance LLC
- HG Vora Capital Management, LLC
On Sunday, Audacy filed a “debtors’ agenda of matters,” with López participating in a virtual session that began at 3pm Eastern on Monday (1/8). This lays out the documentation and process steps and stages as Audacy wishes to see it transpire.
Additionally, it also provides López a window to approve a consolidated creditor matrix and list of the 30 largest unsecured creditors as provided to the court by Audacy. The list is forthcoming, and will likely reveal a host of familiar companies that are owed payments from Audacy that may need to settle, if not paid in full for the monies owed.
THE LEADER’S FUTURE
Meanwhile, Audacy’s filing with the Securities and Exchange Commission made on Monday revealed that President/CEO David Field on January 5 agreed to an amended employment agreement that would become effective upon Audacy’s emergence from debtor-in-possession status.
First, Field agreed that he will serve in a consulting role to Audacy’s lenders to assist in their selection of the members of a new Board of Directors — one in which Field will not have a voting role with respect to the appointment of these individuals. Second, Field will be offered a new long-term employment agreement by the new Audacy board, with a 120-day limit from the date the company would emerge from bankruptcy protection. If no agreement is reached by then, Mr. Field then has 150 days from bankruptcy emergence to tender his resignation.
Field and COO Susan Larkin are also forgoing their 2023 “KERP” bonuses.
What is perhaps most noteworthy is the revelation via a SEC filing of a 2024 retention bonus letter sent by Field to all employees on January 4. With Field mentioning the company “may” proceed with a Chapter 11 filing, he explained that Audacy would pay a bonus on July 1, 2024 — or whenever the emergence from bankruptcy would occur — along with the terms of the offer. Employees had until 5pm Friday (1/5) to agree to the offer and sign it.
With all of the news surrounding Audacy’s bankruptcy filing, and Sunday’s revelation from the company that its beleaguered stock will cease trading with all shares canceled upon Audacy’s emergence from bankruptcy with no distribution, “AUDA,” an Over-the-Counter issue, tumbled to its lowest value yet in Monday’s trading. As of 2:11pm Eastern, Audacy stock was at $0.1077.
Had Audacy not engaged in a 1-for-30 reverse stock split, originally designed to regain NYSE trading compliance, AUDA would be valued at $0.00359.
