The nation’s second-biggest owner of radio stations has sued JPMorgan Chase & Co., arguing that it has breached a 2013 credit agreement and is “unreasonably” withholding consent to certain components of its planned refinancing.
Cumulus Media filed the lawsuit close to midnight (12/12) in U.S. District State Court for the Southern District of New York. Cumulus is represented by Steven F. Molo, one of the country’s leading courtroom advocates and a founding partner of the national litigation boutique MoloLamken LLP.
Court documents show Molo as paying the court’s $400 filing fee.
Cumulus media and investor relations representatives were not available for immediate comment to RBR + TVBR.
RBR + TVBR OBSERVATION (full story below for members only): Fasten your seat belts, folks. Thus far, Cumulus shares are stable as the company’s investors appear to be signaling a vote of confidence in Cumulus CEO Mary Berner after a momentary dip on the initial news of its lawsuit against JPMorgan Chase, from Reuters. We are two years away from a major debt bomb, and the company’s present turnaround story is a slow but steady one that so far seems to be on the right track.
Specifically, the lawsuit brought by Cumulus against JPMorgan Chase seeks judicial review and a declaration that it is allowed to proceed with a refinancing announced last week that commenced Monday.
At issue is $305 million in new debt, represented by new revolving loans due 2020 under the company’s existing credit agreement.
This was announced Dec. 7 as part of a lengthy 8-K filing with the SEC, and reiterated in a filing made today in conjunction with Cumulus’ launch of a private exchange offer by way of a Refinancing Support Agreement with supporting noteholders of approximately $349.7 million, or 57.3%, of the aggregate principal amount of its outstanding 7.75% Senior Notes due 2019.
Bondholders have agreed to this, and upon completion of the exchange offer Cumulus will have retired $610 million in outstanding unsecured indebtedness.
But, it will be cutting that debt resolution in half, and this seems to have raised the concerns of JPMorgan on issuing more credit to a company desperately seeking to pare down its current loans.
“Cumulus needs to proceed with its proposed refinancing, and it needs to do so quickly,” Cumulus said in the complaint.
JPMorgan Chase is the administrative agent for Cumulus, and the media company says its agent has not allowed for the transfer of funds from its $200 million revolving credit line. This was agreed to by bondholders, and would give Cumulus the all-important ability to steer clear of a “springing maturity” on a $1.84 billion loan that would transpire if more than $200 million of the notes are outstanding in January 2019, the lawsuit said.
The 21-page lawsuit also explains to the court that, “Like most terrestrial radio station companies, Cumulus has experienced a recent decline in its business. In response, Cumulus has implemented a series of initiatives designed to improve ratings and revenues, and early indicators suggest that these initiatives are working.”
Cumulus’s ability to fully capitalize on these initiatives, however, is hindered by both its $1.8 billion outstanding in first lien term loans and its 7.75% of senior notes due January 2019. No borrowings are outstanding under its revolving credit facility, which is what Cumulus wants to tap into.
Meanwhile, Cumulus on Tuesday also filed a “Pre 14A” filing with the SEC stating that it will hold a special shareholder meeting at a yet-to-be-determined date in 2017 that would approve the issuance of additional Class A common stock in connection with the private exchange offer — essentially codifying the debt-for-equity deal.
This would authorize the issuance of up to 100 shares for two new classes of common stock: Class D and Class E. Each classes of common stock would be valued at $.01 par value per share.