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Cuts at Beasley Detroit

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

Post by MWmetalhead » Sat Jul 04, 2020 10:25 am

Alright, so for those of you not insane enough to read through all of the above banker/legal speak, here are the key takeaways:
-The Second Amendment to Credit Agreement allows BBGI to continue to operate as normal and forestalls, at least for now, any Bankruptcy. The market environment for "old" media companies, especially radio, is terrible right now due to a depressed advertising market. Radio's financial issues pre-dated COVID-19, of course, but COVID exacerbated an already bad situation.
-The Credit Agreement penalizes BBGI if it fails to refinance its Senior Secured Credit Facility(i.e. its $20 million line of credit plus its $238 million in Term Loans) by December 31, 2021. BBGI will need to pay a surcharge of $7.74 million to U.S. Bank, et al. on that date if the loans are not fully repaid by then. This is a "nice" way of signaling to BBGI that the lenders are worried about future credit risk and they'd prefer BBGI to find financing elsewhere if it is available.
-A review of the March 31, 2020 Balance Sheet and notes on Form 10-Q suggest the Company, prior to the $5 million infusion of cash by Mr. Beasley, had no unused Revolver borrowing capacity available and probably about six to nine months' worth of cash on hand to fund cash burn in the current market climate.
-The $5 million in cash contributed by Mr. Beasley plus the $5 million standby letter of credit he obtained & pledged as collateral (which can be drawn by U.S. Bank in the event of a cash crisis) creates probably six more months of buffer.

The EBITDA covenants suggest the Company and Lenders are expecting the second half of 2020 and first half of 2021 to be absolutely terrible from an earnings standpoint. Without reading the documents and Beasley's most recent 10-K much more deeply, I have no idea why the January covenant is so soft and why the requirements from February 2021 through June 2021 move around so much. However, in every single case, the bogie is much softer than the 10-31-2020 and 11-30-2020 benchmarks.

For any company with over a quarter billion in debt to expect trailing 12-month EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) of less than $50 million is a pretty weak result, and anything less than $10 million is a catastrophic result. The covenant bogies are all well below $10 million!!!

"EBITDA" is a metric used to measure core operating profit and excludes payments relating to interest expense, income taxes, non-recurring items unrelated to operations, and non-cash items (such as depreciation expense, amortization expense, and asset write-downs).

"Total Debt" or "Net Debt" as used earlier means the sum of outstanding line of credit borrowings, term loan borrowings, and shareholder loan borrowings, minus cash reserves, subject to a cash reserve limitation of $20 million.

The "Total Leverage Ratio" is simply Net Debt divided by EBITDA for the preceding twelve months.

"First Lien Leverage" is the sum of line of credit borrowings and term loan borrowings, minus cash reserves up to $20 million.

Not mentioned in my earlier posts is the fact a 13-week cash flow forecasting requirement has been added, to be updated twice monthly, until such time the Total Leverage Ratio falls below 5.00x. This mechanism allows Lenders to monitor to favorable or unfavorable budget variances in almost real time and is customarily required when serious concern about insolvency risk exists.

In closing, this is a kick the can down the road type strategy, where Lenders are hoping Bankruptcy can be staved off until a time the economy is much stronger than it is today, where losses incurred in Bankruptcy aren't as severe as would be the case today. The key to Beasley's survival over the next year or two will be maintaining sufficient liquidity to continue to fund normal operation. I suspect the $5 million check Mr. Beasley just wrote to prop-up the balance sheet won't be the last.

If the advertising climate for radio remains in the shitter twelve to fifteen months from now and members of the Beasley family are no longer willing to write checks to fund the company, then BBGI will likely have no choice but to enter Chapter 11. For now, the financial covenants are loose enough - and the company has enough dry powder on its balance sheet - to tread water for at least twelve months.



Mega Hertz
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Re: Cuts at Beasley Detroit

Post by Mega Hertz » Sat Jul 04, 2020 5:25 pm

MW-

We all knew that as long as Greater Media held the keys, WRIF would always be rock and WCSX would always be classic rock. But the way the two stations have been ran since the takeover, mixed with the current economic climate, do you think there's any chance in hell there'd be any kind of wholesale change? I don't think Beasley cares about heritage like GM did. And we've seen plenty of long time stations (KLOS comes to mind) go down for a few extra bucks. What say you?


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MWmetalhead
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Re: Cuts at Beasley Detroit

Post by MWmetalhead » Sat Jul 04, 2020 6:23 pm

Zero chance. There are no buyers at any sort of price that would make sense.

KLOS was one of the weaker billing FM stations in L.A. for years. WRIF is a top five biller (maybe top 3) and WCSX is probably just inside or outside the top 10.

If Beasley as a whole company is ever sold (I could see a sale to private equity happening a couple years from now), they'll keep the current formats on 94.7 and 101.1 in place.



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