It’s a whole new day for Cumulus Media.
On Monday morning, the company with Mary Berner firmly in control as CEO further whittled away its remaining, post-bankruptcy debt.
How did Cumulus’ shareholders react?
The broadcast media company’s stock declined as soon as shareholders got word of the voluntary action.
The owner of such stations as KGO in San Francisco and WLS in Chicago made a $50 million voluntary debt prepayment, a move that Cumulus says “continues its commitment to reducing leverage.”
Rather than propel CMLS forward, shares headed southward at 9:42am Eastern, moving from $17.32 to $16.50 by 12:14pm Eastern.
At the closing bell, CMLS was down 4.3%, to $16.42, on higher than average volume of 171,500 shares.
It’s a curious dip for Cumulus, which used the net proceeds from its sale of KLOS-FM 95.5 in Los Angeles to Meruelo Media to fund the debt prepayment, along with cash on hand generated from operations.
Meruelo closed on its purchase of KLOS on July 17. It bought KLOS from Cumulus for $43 million; an LMA gave Meruelo control of the Classic Rock station on April 16.
As such, the cash on hand used by Cumulus totals $7 million.
That’s a little less than half of the cash “new” Cumulus had at the end of Q1. According to its 10-Q filing with the SEC, some $15.33 in cash and cash equivalents was on hand, minus restricted cash.
With Monday’s prepayment, Cumulus has reduced its debt by approximately $250 million since emerging from debtor-in-possession status on June 4, 2018, bringing the company’s total debt down to approximately $1.05 billion. By comparison, Entercom‘s long-term debt at the end of Q1 totaled $1.69 billion; $1.4 billion in assumed debt is attributable to its tax-free merger with CBS Radio.
At the same time, Cumulus in mid-June priced $500 million in aggregate principal amount of 6.750% senior secured first-lien notes due 2026, an increase of $200 million from its initial plan.
Net proceeds of the offering were used to “partially” repay Cumulus’ indebtedness under its senior secured term loan facility.
Maybe Wall Street is alarmed at the desparate fire sale prices Cumulus has accepted for legacy major market stations.
Every time one of these fire sales occurs, it revalues the remainder of the portfolio. Market capitalization is nothing more than the overall enterprise value less the debt. So it really doesn’t matter how much debt is paid if the enterprise value is coming down in tandem. Eventually there is no debt but then also no value left either. Basic stuff. Finance 101.
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