Playing musical chairs for Cumulus investors


Back when Cumulus Media struck its deal to acquire Citadel Broadcasting the plan was for Crestview Radio Investors, a fund of Crestview Partners, and MIHI LLC, a fund of Macquarie Capital, to split the new equity investment of up to $500 million. That’s been rearranged as the financial pieces begin to fall into place for the eventual closing.

If you read that previous story you saw that UBS Investment Bank was acting as lead financial advisor to Cumulus and had also committed to provide debt financing. Now it has stepped up its involvement to have UBS Securities make an equity investment as well. Crestview will still invest up to $250 million, while Macquarie and UBS will split the other half to invest up to $125 million each.

As RBR-TVBR spelled out a few days ago, the exact amount of the equity investment depends on which cash/stock split is elected by Citadel’s shareholders, which will be driven by where Cumulus Media’s stock is trading at the time – whether up or down from the target price of $4.34. If the stock is trading below that level it’s a pretty good bet that the entire $500 million equity investment will be required. But then, Cumulus will be issuing fewer new shares to Citadel’s shareholders.

Crestview, UBS and Macquarie are also being paid for their efforts in putting the funding together. “Contemporaneously with the closing of the Investment, Crestview and Macquarie will each receive a cash commitment fee equal to $10.0 million, and UBS Securities will receive a structuring fee equal to 3.0% of its equity commitment. In addition, Crestview will receive warrants to purchase, at an exercise price of $4.34 per share, 7,776,498 shares of the Company’s class A common stock and, pursuant to a monitoring agreement to be entered into in connection with the closing of the Investment, a monitoring fee of $2.0 million per year, payable in installments quarterly in arrears, until the fifth anniversary of the closing of the Investment. Up to $80.0 million of Macquarie’s commitment is terminable by the Company, in whole or in part, at any time. Macquarie will also receive a syndication fee of approximately $0.2 million, and an equity commitment fee of approximately $0.2 million plus an amount, computed like interest on a daily basis from March 26, 2011 until the closing date of the Investment, equal to 3.1% per annum on the dollar amount of such portion of its commitment outstanding from time to time and not terminated by the Company,” Cumulus reported in an SEC filing.

RBR-TVBR observation: There are lots of moving parts as Cumulus sells $610 million of new bonds and gets all of the other debt and equity pieces in place – not to mention FCC approvals – so it can close on both CMP and Citadel to create a new radio giant worth well over $4 billion. But Lew Dickey appears to have everything moving in the right direction.