By Cameron Coats and Adam R Jacobson
WASHINGTON, D.C. — Thursday morning began with a somewhat unexpected announcement from the audio content creation and distribution company led by President/CEO Mary Berner: Chapter 11 bankruptcy protection is being sought at Cumulus Media, as the broadcast radio station owner has entered into a restructuring support agreement that will eliminate roughly $600 million in debt.
The news arrived as more than 500 participants in the NAB State Leadership Conference awaited entry into office buildings on Capitol Hill to meet with legislators including Sen. Amy Klobuchar (D-Minn.), who sits on the Senate Commerce Committee, which maintains FCC oversight.
For Atlanta-headquartered Cumulus, which made the filing in U.S. Bankruptcy Court for the Southern District of Texas, operations will continue as usual for employees, advertisers, and listeners during the restructuring process.
Long-time employees know the drill. The bankruptcy filing is the second under Berner’s leadership, and follows a May 2018 confirmation by a New York federal bankruptcy judge of a plan that eliminated half of the company’s then-$2 billion in debt.
For unsecured debtors, the real struggle begins with regard to payment or settlement for unpaid services.
With Cumulus in court with Nielsen over the audience measurement company’s “nationwide ratings” policy and network ratings contract disagreements, the bankruptcy filing brings a new chapter to a company that has myriad challenges. As Cumulus sees it, the filing in Texas is designed “to substantially reduce the broadcaster’s leverage and set a financial structure aimed at long-term stability and investment.”
According to the proposed Plan of Reorganization, all existing funded debt will be canceled in exchange for 100% of the reorganized equity and $50 million in new convertible notes. The company’s revolving credit facility would be amended and restated to provide ongoing liquidity. Cumulus expects the court to consider approval of the plan within 60 days, with emergence dependent on receiving FCC approvals.
The company said the move follows prolonged economic and industry pressures that weighed on revenue across the sector and created limits on its ability to invest at needed levels.
In prepared comments released early Thursday, Berner said, “While we have outperformed the market on many of our most important metrics, including share gains in both local and digital revenue, the broader macroeconomic and industry-wide pressures we have faced have remained unrelenting. Against that backdrop, it became clear that Cumulus’s remaining debt burden limited our ability to fully realize the company’s potential, and this agreement represents a major step forward.”
Berner added that on emergence from its second bankruptcy filing in a decade, Cumulus will have “a stronger financial foundation” that will better position Cumulus “to continue investing in premium content, enriched audience experiences, advertiser performance enhancements, and the ongoing growth of our digital marketing offerings.”
