What will likely happen with Dial Global


Dial GlobalWe all know this is a very tough time for radio syndicator and national rep firm Dial Global and the industry in general. It’s nail-biting time, as their next debt covenant is due 2/28. We’ve heard they lost $69 million last year; Co-founder and Co-CEO David Landau has left the company; they’ve de-listed from NASDAQ. We spoke to CEO Spencer Brown.

DG has a decent business model, but now finds itself in a very challenged capital structure—yes, buying Westwood One when they did was not a great idea, but who could know that radio would take such a hit after what Rush Limbaugh said about Sandra Fluke and scared away advertisers—not only from Talk radio but news breaks that surround it as well. Hey, the economy continues to suck, so that contributed too.

Should DG’s debt holders throw more money in and try to save it? Yes, if it doesn’t just prolong the agony for another 12-18 months. Things need to be restructured, and that’s exactly what CEO Spencer Brown has told us is happening. Let’s not forget, DG has built a great platform in the industry over the years.

He tells RBR-TVBR: “We are deep into negotiations and conversations with our banks and sponsors. Our banks are both first lien and second lien lenders. It’s really kind of a multi-party negotiation between Oaktree, Gores Group; and our second lien is a bank called Macquarie and another financial institution called Black Rock. These are all multi, multi, multi-billion dollar financial institutions. It’s really just a matter of whether they can and will negotiate amongst themselves. From where I sit—and granted it’s my perspective—there is zero chance of us either not getting a deal or a financing done—or at least a further extension. This has been going on since November. The company has adequate cash, top-rate, for some period of time.”

We also heard if DG goes down and files Chapter 11, Cumulus would likely take it.  If it becomes a “yard sale,” Cumulus—and other competitors—would likely look at picking off a few pieces at the right price. However, at this point, a source close to the company tells us they are not interested at this time.

As far as “pieces,” the exception to that would probably be the NFL, which DG has an excellent relationship with. NFL was particularly pleased with its coverage of the Super Bowl–especially during the blackout.

Brown adds, “I mean listen, it’s kind of a parlor game until we get things settled. But I think the concept of the company being broken up in the next couple of weeks and Cumulus coming in is either somebody’s idle speculation or somebody else’s pipe dream. I just don’t see that happening. We’ve been involved in many conversations and I feel pretty good, directionally, of where they’re heading. Nothing’s done until it’s done, but in terms of everything I’m, seeing and everything I’m participating in, it’s heading directionally in the right way and I just don’t see that happening.”

Bottom line, if the funding doesn’t come through and Chapter 11 reorganization has to be declared, Brown says: “There’s no basement of gold bars here to liquidate. So at the very least, we would reorganize. But that’s not at all something that we’ve spent time on. It’s really being spent on restructuring our debt. In fact, looking back to our last filing in mid-January, our second lien lenders just invested another $5 million into the company (or at least access to it). Why would they do that if–again, these are not institutions without resources–they felt [there was no future with us]?”

RBR-TVBR observation: If we were to bet on this, we think Oaktree, et al will put more money in to avoid losing everything they’ve put in. They’ll keep it going for another year and there is no conversation on this for 12 more months. Then, it will hit the wall or it won’t. Restructuring is key.


  1. Carl,

    Interesting article. Actually sad to see where this has ended up. I have bought media from them over the years, and have loved working with a couple of their reps. But I would be stunned if bankruptcy is not the outcome, and here is why.

    — You mention that Oaktree might put in more money, but private equity firms rarely invest “good money after bad.” And why would any equity be invested at this point? Equity invested today does not get a return until after the debt is paid back — and there is almost $250 million of debt. This company is not worth anywhere near that amount (as Brown notes, there are no assets, e.g., radio station licenses, etc.).

    — You wrote that the company is losing money. As far as I can tell, Dial cannot even afford its interest payments (Brown noted that the banks have allowed them to hold off making payments to the tune of $5M over the past few months). What debt “restructuring” makes sense when the company is cash flow negative? Finally, all of that suggests that that Dial is close to having to make a decision between interest payments vs. payroll — but cannot afford to do both. That is a really scary place to be, as things can unravel quickly from here. As you said: “nail-biting time.”

    — It is really a shame, because there are some good people there. And it will be another mess for the industry when this unfolds (think how many of us use Dial’s services or buy media from their reps). I would expect that several different companies will come pick up some pieces. You mention the NFL, I could see a number of players lining up to get the rights (ESPN anyone?), though not at the over-inflated price Dial paid (there is a reason they have negative cash flow…). There are some pieces there, but they just do not add up any more. It is really too bad for all of us in the industry.

  2. Have to say, I always wondered why they had 3 CEOs, particularly in a tough economy. And each of the CEOs was earning CEO-type pay, north of $500k annually! Anyway, Landau’s departure was a quick savings.

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