CreditRiskMonitor, a company led by a former hedge fund manager and attorney based in Rockland County, N.Y., has offered an assessment of what it believes are the top broadcasting and cable companies with a high chance of Chapter 11 bankruptcy reorganization.
One of the companies owns a big MVPD serving the New York Tri-State Area. Another is a DBS provider in a big dispute with one of the nation’s largest Hispanic media companies. The other companies two this Wall Street observer are large publicly traded radio companies that are well into the “red zone.”
Since 1999, Jerry Flum has been CEO of CreditRiskMonitor.com, a publicly traded company that on August 6 saw the resignation of William Danner as its President after more than 13 years in the role.
What is CreditRiskMonitor? It describes itself as a web-based publisher of financial
information “that helps corporate credit and procurement professionals stay
ahead of business financial risk.”
Unlike commercial credit bureaus including Dun & Bradstreet, CreditRiskMonitor’s primary expertise and focus is on financial analysis of public debt and equity companies.
That’s why its just-released note on media companies may require your immediate attention: CreditRiskMonitor says both Townsquare Media and Spanish Broadcasting System (SBS) are experiencing “a high level of financial distress and have an elevated probability of bankruptcy.”
Really? CreditRiskMonitor arrives at its assessment through the use of a “FRISK” score, which uses a “Merton” type model using stock-market-capitalization and volatility. Merton models are widely used to measure the credit risk of a corporation’s debt and potential for credit default.
The FRISK score also takes into account financial ratios, including those used in the Altman Z-Score model, and takes a close look at bond agency ratings from Moody’s and Fitch.
With that, assignment of a “FRISK Score” to a particular company is made.
SBS has a FRISK Score of 1 — indicating that the company that is largely controlled by Chairman/CEO Raúl Alarcón Jr. as a supermajority shareholder could be following in the footsteps of iHeartMedia, Cumulus Media and the Frischling family‘s Steel City Media in Kansas City and Pittsburgh.
CreditRiskMonitor produced a 28-page report on SBS. While the company’s FRISK Score had declined by March 2018, worries over a potential bankruptcy aren’t new ground for SBS and Flum.
From September 2017-January 2018, and in July 2018, SBS also had a FRISK Score of 1.
This means that, in Flum’s view, SBS has between a 10% and 50% chance of bankruptcy.
Of course, like the weather, it’s just a forecast. And, depending on how you interpret the forecast, the chances of SBS not filing for bankruptcy protection are higher.
SBS’s fiscal danger, based on its Z”-Score, is nevertheless noteworthy.
While SBS’s financial concerns have been the subject of many reports in recent months, the presence of Townsquare Media — with $1 billion in assets — may come as a surprise to some market observers.
CreditRiskMonitor did not elaborate on Townsquare, other than assigning a FRISK Score of 2 to the company, which is reestablishing itself as a local radio and digital media operation and is diminishing its presence in the live events and festivals business.
The FRISK Score of 2 was also given, without comment, to DISH Network and to Altice USA, parent to Optimum — the dominant MVPD choice in Westchester County, N.Y. and on Long Island. Optimum is the former Cablevision, sold by the Dolan family to France-based Altice in June 2016; Altice also owns SuddenLink, an MVPD provider in such areas as Arcata-Eureka, Calif.
RBR+TVBR‘s initial coverage incorrectly noted that Flum was the individual at CreditRiskMonitor who assessed the financial risk of companies and assigned the FRISK score rating to them. The FRISK scores are a mathematically derived opinion, calculated daily with the most recent information in the company’s database, using a model created by its head of analytics, Dr. Camilo Gomez.
