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Cuts at Beasley Detroit

Discussion pertaining to Detroit, Ann Arbor, Port Huron, and SW Ontario
fuzzpower
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Re: Cuts at Beasley Detroit

Post by fuzzpower » Wed Jan 01, 2020 5:41 am

Voicetracking, I am assuming. Her twitter page has the same link.



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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Wed Jan 01, 2020 7:51 am

I do agree with an earlier post that Carlini likely has a non-compete. (Yet, Doug Podell was heard on 106.7 just days or even hours after quitting 93.1. Go figure.)

It's great to know fans of hers can listen to her online via Coyote 102.5's stream.

I have to admit - she is SO associated with WRIF that it may seem strange hearing her on another station around these parts, if that were to occur, not unlike hearing Steve Kostan on WOMC. I actually think Mr. Kostan has adapted to WOMC quite nicely, although I know others on the Buzzboard disagree.

Rock 105 / Classic Rock The Bear up north seems to have an affinity for former WRIF air talent. Might we hear her on one of those stations soon? (Longtime WLAV personality Kim Carson tracks a shift for The Bear, too.)


Lori Bennett and Bob Walker have turned WLAV from an iconic classic rock station into a ratings boondoggle. Sad.

armchair pd
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Re: Cuts at Beasley Detroit

Post by armchair pd » Wed Jan 01, 2020 1:15 pm

MWmetalhead wrote:
Wed Jan 01, 2020 7:51 am
I do agree with an earlier post that Carlini likely has a non-compete. (Yet, Doug Podell was heard on 106.7 just days or even hours after quitting 93.1. Go figure.)
Doug I believe was part-time at Nash and didn't have a non-compete.
Brutal.
Anne could wind up on WOMC, isn't that where almost all ex- Riff/CSX jocks go?
She'll sound great wherever she lands.
While I hate to see local talent lose a job, Julene Jordan sucked. Always sounded unprepared and every other word was 'Um'



whitebalance
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Re: Cuts at Beasley Detroit

Post by whitebalance » Wed Jan 01, 2020 5:13 pm

Beasley probably couldn't handle the states minimum wage increase.



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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Wed Jan 01, 2020 6:37 pm

On the surface, Beasley doesn't appear to be in terrible financial shape. 95% of their long term debt is not scheduled to mature until 2023 and operating profit margins YTD in 2019 appear to be a bit better than the same period last year.

The problem is this - the Company's First Lien Leverage Ratio covenant under its Credit Agreement with its lender syndicate tightens from 5.75x (in effect thru 12-31-19) to 5.25x effective 3-31-20. Commercial banks generally like First LIen Leverage to be no greater than 3.5x, but because radio is a declining business that was given far too much debt financing in the 2000s, in most cases commercial lenders have no choice but to grant unusually lenient financial ratio covenants.

Beasley is very coy about where its First Lien Leverage Ratio actually stands. I see zero reference to EBITDA or Adjusted EBITDA in the company's Form 10K and Form 10Q filings. The coyness suggests they are worried about lack of covenant headroom.

My back-of-envelope calculation, assuming unrestricted cash is allowed to be netted against 1st lien debt for ratio determination purposes, is somewhere around ~5.75x (imagine that!) based on YTD 9-30-19 performance. This leaves virtually NO wiggle room relative to the 5.75x covenant test at YE 2019. That said, the Credit Agreement probably allows some bullshit non-GAAP add backs that make the actual covenant measurement better, probably closer to 5.25x. Still, that leaves very little comfort when one considers the fact the covenant will, in fact, tighten to 5.25x upon issuance of 3-31-20's financial statements.

$13.5 million for WDMK and the Praise Network may or may not have been a reasonable price depending on tower lease arrangements, programming covenants, and a number of other things. The company financed $10 million of that purchase price with Revolver borrowings. At best, this was a Leverage Ratio neutral acquisition, as I doubt unlevered cash flow is much more than $2 million a year from those assets.

Beasley's stock is priced at $3 per share and has a 6% dividend yield. As long as Beasley remains in covenant compliance, shareholders are in decent shape. However, if Beasley trips its First Lien Leverage Ratio covenant, the first thing Lenders will probably require is suspension of shareholder dividends. That bad news would likely cause the share price to tumble. The next thing they'll require is increased pricing, either in the form of an increased interest rate, an amendment fee, or both. The final thing they'll require is greater restrictions with respect to permitted investments.

Unlevered cash flow does look better YTD in 2019 than in 2018. If cash flows were to remain stable into perpetuity, the senior secured lenders could probably expect full repayment within ten years. However, radio is a declining industry. A ten year repayment horizon is unappealing based on "status quo" cash flows.

Could Beasley elect Bankruptcy? It's a possibility that cannot be ruled out. However, their long-term debt situation isn't as severe as that of Cumulus or iFart pre-bankruptcy. I think it's much more likely that Beasley and their Lenders (virtually all of which already share in 1st liens against Beasley's assets) will come to an agreement to modify the existing Credit Agreement out of court.

What does this all mean?
1. Don't automatically expect Beasley's dividend to shareholders to continue over the long-term. It's an iffy proposition at best.
2. Expect additional Beasley expense cuts.
3. Will lenders push Beasley to sell its ownership stake in Quu, Inc. or Renegade Esports? Who the hell knows. (Lenders might actually like these ventures.)
4. Expect a modification to Beasley's existing Credit Agreement at some point in early 2020, unless political ad revenue gives cash flow a quick boost (which is certainly possible).
5. Do not expect any further radio station acquisitions by Beasley that involve usage of cash on hand or incurrence of new debt. Funding any such acquisition via a new equity issuance also seems like a stretch at this point.

If Beasley is able to keep the status quo Credit Agreement terms in place thanks to improving cash flows or if Lenders agree to loosen the First Lien Leverage Ratio without mandating reduced dividend payments to shareholders, we might actually see a share price rally in 2020.

In the meantime, look for additional waves of expense reductions at Beasley radio stations across the country.


Lori Bennett and Bob Walker have turned WLAV from an iconic classic rock station into a ratings boondoggle. Sad.

Mega Hertz
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Re: Cuts at Beasley Detroit

Post by Mega Hertz » Wed Jan 01, 2020 7:15 pm

Jesus Christ, MW. Wanna do my taxes?


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audiophile
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Re: Cuts at Beasley Detroit

Post by audiophile » Wed Jan 01, 2020 7:21 pm

LOL

I sure hope banks call MW before making loans to broadcast companies. :)


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windsor
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Re: Cuts at Beasley Detroit

Post by windsor » Wed Jan 01, 2020 8:28 pm

The hell with banks...……...Beasley better call him. :lol


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Re: Cuts at Beasley Detroit

Post by audiophile » Wed Jan 01, 2020 8:50 pm

Caroline Beasley won't call him, but they should.


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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Wed Jan 01, 2020 8:57 pm

Jesus Christ, MW. Wanna do my taxes.Jesus Christ, MW. Wanna do my taxes?
I'd just use Turbo Tax, just like I use for my own taxes. :)

As far as Beasley is concerned, I just read three different stock analyst reports, and not a single one of those idiotic reports bothered mentioning the financial covenants that Beasley is required to meet per its Credit Agreement! Unbelievable.

One of the analyst reports did provide various grades on a 0 (very poor) to 5 (strong) scale on various metrics. One of the metrics was "solvency" - basically, ability to avoid a payment default. Beasley was given a score of 0.5. :lol


Lori Bennett and Bob Walker have turned WLAV from an iconic classic rock station into a ratings boondoggle. Sad.

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audiophile
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Re: Cuts at Beasley Detroit

Post by audiophile » Wed Jan 01, 2020 9:00 pm

Wow! Do you agree with that?


Ask not what your country can do FOR you; ask what they are about to do TO YOU!!

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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Wed Jan 01, 2020 9:32 pm

Beasley had just under $12 million in cash on hand at 9-30-19. Pro forma, they are cash flow positive.

Before considering principal repayment and dividend payments to shareholders, and after excluding non-recurring events, Beasley is capable of generating about $24 million in free cash flow per annum.

Why is that important?
- If they lose access to their Revolver for a period of time, it shouldn't be a big deal. They are not burning through cash when excluding non-recurring items. They are, in fact, generating cash from core business activities. This means they are not reliant on Revolver borrowings for survival.
- When comparing the $24 million figure to ~$240 million in LT debt obligations, the payback period (all else equal) is ten years. That isn't good, but it's not terrible for a leveraged company in the AM/FM broadcasting business.

I doubt the Beasley family, which likely still holds a large percentage of common shares, wants to go into Bankruptcy Court. I also doubt the Lenders want to take a large haircut on their debt positions, which is what would likely occur if Beasley were to file Bankruptcy.

Bottom line - both sides have incentive to work together to modify the Credit Agreement, on an out-of-court basis, should financial covenant compliance under current terms prove difficult.

As such, I think the risk of Beasley filing Bankruptcy in the next twelve months is low.

I think the risk of the dividend being cut or eliminated is medium-high. However, if a modification to the Credit Agreement is successfully entered (or proves to be entirely unnecessary) and the dividend is NOT cut, a stock price rally is a real possibility.

Finally, it would not shock me if the Company is sold and goes private within the next few years. Under such a scenario, the Beasley Family would possibly retain some sort of involvement in the company (i.e. a couple board seats, a minority ownership stake, etc). I cannot see such a sale occurring soon - i.e. within the next 12 to 18 months - simply because the Credit Agreement situation needs to be resolved first. A private equity firm isn't going to offer to purchase the shares at or above current fair value when there is over $240 million in 1st lien debt that matures in 2023 on a company whose EBITDA is currently levered at 6x in an industry that is generally flat to declining. I could see a sale of equity occurring in conjunction with a Credit Agreement refinance down the road.


Lori Bennett and Bob Walker have turned WLAV from an iconic classic rock station into a ratings boondoggle. Sad.

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audiophile
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Re: Cuts at Beasley Detroit

Post by audiophile » Wed Jan 01, 2020 9:36 pm

240 Million of debt is a lot more then I thought it was for them. If the economy suffers they are in trouble.


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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Wed Jan 01, 2020 9:55 pm

Yup. They'll start hemorrhaging cash if that occurs. A significant rise in interest rates would also hurt them (all of their bank debt is priced using a variable rate), but that shouldn't be a serious threat anytime soon.

I'm sure the Lenders are hoping like crazy that 2020's political advertising spending spree will lead to an unusually large amount of free cash flow, which then can be partially swept to retire Term Loan balances early.

In the current environment, Beasley should be carrying no more than about $160 million in LT debt. If I was looking at this as a prospective Lender, given commercial radio's long-term prospects, I'd probably want 1st lien exposure to be no more than $100 million! They are overlevered, no doubt.


Lori Bennett and Bob Walker have turned WLAV from an iconic classic rock station into a ratings boondoggle. Sad.

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audiophile
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Re: Cuts at Beasley Detroit

Post by audiophile » Thu Jan 02, 2020 7:01 am

Trump spent a little of nothing in 2016. The RNC will be spending, no doubt.

12 million in cash is nothing for that much debt.


Ask not what your country can do FOR you; ask what they are about to do TO YOU!!

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