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Cumulus changes

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Myron Falwell
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Re: Cumulus changes

Post by Myron Falwell » Wed Sep 09, 2020 10:04 am

Wouldn't it make sense to sell your towers to someone who knows what they're doing and not have another WLQR 1470 mess on your hands? Plus past transmission site sales for WMAL and KABC were done as the real estate around them were worth more than the stations themselves.

I'll say this about WABC, it was unloaded to a multi-millionaire who can afford to lose boatloads of money on the station in a way Cumulus just couldn't.


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WOHO
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Location: Cumulus has killed 1470 KHz

Re: Cumulus changes

Post by WOHO » Thu Sep 10, 2020 1:12 am

IIRC, WABC is hiring Cousin Brucie away from SiriusXM to do his show on AM radio again!



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TeddyBear
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Re: Cumulus changes

Post by TeddyBear » Thu Sep 10, 2020 6:16 pm

WOHO wrote:
Thu Sep 10, 2020 1:12 am
IIRC, WABC is hiring Cousin Brucie away from SiriusXM to do his show on AM radio again!
Wonderful! He'll be the new star, as AM radio overshadows everything else! Old Fashioneds for everyone!


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Colonel Flagg
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Re: Cumulus changes

Post by Colonel Flagg » Thu Sep 10, 2020 7:30 pm

Myron Falwell wrote:
Wed Sep 09, 2020 10:04 am
Wouldn't it make sense to sell your towers to someone who knows what they're doing and not have another WLQR 1470 mess on your hands? Plus past transmission site sales for WMAL and KABC were done as the real estate around them were worth more than the stations themselves.
Have you recently visited any sites owned by Vertical Bridge? "Derelict Bridge" would be a more fitting moniker. :lol


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Ben Zonia
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Re: Cumulus changes

Post by Ben Zonia » Thu Sep 10, 2020 7:54 pm

Colonel Flagg wrote:
Thu Sep 10, 2020 7:30 pm
Myron Falwell wrote:
Wed Sep 09, 2020 10:04 am
Wouldn't it make sense to sell your towers to someone who knows what they're doing and not have another WLQR 1470 mess on your hands? Plus past transmission site sales for WMAL and KABC were done as the real estate around them were worth more than the stations themselves.
Have you recently visited any sites owned by Vertical Bridge? "Derelict Bridge" would be a more fitting moniker. :lol
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Last edited by Ben Zonia on Thu Sep 10, 2020 8:10 pm, edited 1 time in total.


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MWmetalhead
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Re: Cumulus changes

Post by MWmetalhead » Thu Sep 10, 2020 8:02 pm

t's a bad deal because Cumulus has hardly any renters. Where the 14.25x is coming from?
The sale proceeds equal 14.25x negative impact to annual EBITDA, if I remember correctly.
This is the equivalent of you selling your house that you own free and clear to mortgage company for $142,500. They then require you to lease it back to you for $10,000 a year (and make you pay the taxes) and they have the ability to rent all the extra rooms to someone else while you are there. At the end of the 10 year lease they bulldoze the property and kick you out.
I disagree wholeheartedly with the above analogy.

For starters, Cumulus' debt doesn't come due in 20 years or 30 years; it comes due in 2026.

Although Cumulus' secured term debt and 6.75% Senior Notes are not subject to financial maintenance covenants, I assure you the creditors and institutional equity holders pay close attention to items such as the company's net leverage ratio. It is certainly possible there are side agreements between the company and certain constituencies of creditors whereby the company agreed to use best efforts to liquidate non-core assets so as to accelerate repayment of loan balances, which in turn improves equity value and equity tradeability. Remember, lenders who took a big write-down in Bankruptcy received the vast majority of the equity in Reorganized Cumulus. These same parties also appoint a super majority of the Board of Directors.

Bottom line - if the prepetition lenders want Cumulus to move non-core assets, chances are, the occupants of the C-suite will act on those wishes.

In exchange for taking a ~$15 million EBITDA hit (although, I understand the rent expense will actually be categorized as interest expense, so technically it won't be a hit to unadjusted EBITDA), the Company will be able to retire something like $220 million in LT debt. That is an excellent trade off.

I would hope Mary Berner isn't stupid, I would hope the Cumulus CFO isn't stupid, and I certainly would hope that Cumulus internal and external legal counsel aren't stupid. I would hope extensive due diligence was performed on Vertical Bridge. I suspect the lease term is much lengthier than 10 years. It could be a 10 year base term followed by multiple 5-year extension options, for example.

Using normalized (i.e. non-COVID impacted) EBITDA, this transaction basically takes Cumulus from, say, a 4.40x levered company to a 3.40x levered company. In the world of leveraged corporate finance, that is a noteworthy improvement. I think anything north of 3x remains too risky for a company in a declining industry, but it's a big step in the right direction.

You and some other folks seem to be focused on "doomsday" / worst case type scenarios. Are there risks? Certainly. My gut feeling is those risks aren't strong enough to warrant rejection of the sale-leaseback.

By the way, the interest expense savings Cumulus will enjoy from prepaying its term debt will largely offset the rent expense it will now have to pay for the tower sites.


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