Strategy

Debt Load Lands Cumulus Media in Chapter 11

“The debt overhang left by previous years of underperformance remains a significant financial challenge," the radio station owner's CEO says.
Matthew HellerNovember 30, 2017
Debt Load Lands Cumulus Media in Chapter 11

Cumulus Media, America’s second-largest radio station owner, has filed bankruptcy to relieve a debt burden it accumulated during an acquisition spree and that it has struggled to service amid declining ratings and advertising revenue.

The Chapter 11 petition filed Wednesday came with a restructuring agreement with, among others, secured lenders that would reduce Cumulus’s debt by more than $1 billion. According to CFO John Abbot, the company has more than $1.73 billion in debt, including more than $637,000 in senior notes due in 2019.

Much of the debt load stems from the acquisition spree, during which Cumulus Media spent approximately $5 billion to expand its network and station businesses between 1998 and 2013. In the largest deal, it acquired Citadel Broadcasting for $2.5 billion in 2011.

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“The debt overhang left by previous years of underperformance remains a significant financial challenge that we must overcome for our operational turnaround to proceed,” Cumulus CEO Mary Berner said Wednesday in a news release, adding that the restructuring process would “relieve the financial constraints on our continued progress.”

Berner in 2015 replaced Lew Dickey, who founded Cumulus in 1998 and orchestrated the expansion strategy.

Cumulus owns and operates 446 radio stations across the country, putting it behind only iHeartMedia, which itself has been experiencing financial duress as advertisers and listeners migrate away from radio to other formats including digital streaming.

In a court declaration, Abbot said Cumulus had “struggled to develop the management and technology infrastructure” required to integrate its acquisitions and was “unable to achieve the cash flow projections it had made to support the prices paid for those acquisitions … resulting in leverage levels significantly in excess of original projections.”

Since 2012, he said, the company has also experienced declining year-over-year performance in ratings, revenue and earnings, reflecting in part “the availability of content and advertising opportunities in growing digital streaming and web-based digital formats.”

Cumulus’s flagship radio stations include classic rock mainstay KLOS in Los Angeles and WABC in New York. Berner said it had “ample cash” to support its ongoing operations.