By RODNEY HO/ firstname.lastname@example.org, originally filed Wednesday, March 16, 2016
iHeartMedia – the nation’s largest radio company which owns several stations in Atlanta including Power 96.1, 94.9/The Bull and Radio 105.7 – is buckling under a massive debt load of more than $20 billion.
The San Antonio Express-News reported that the company could file for bankruptcy.
According to the story, two Boston private-equity firms Bain Capital and Thomas H. Lee Partners purchased 70 percent of iHeartMedia for $24 billion in 2008; the other 30 percent is publicly traded. Much of the company’s debt stems from that acquisition. And now the company and bondholders are in court arguing over how the debt is to be reduced or restructured.
Although the radio stations still generate plenty of cash for the company, revenues have stagnated, making it difficult for the company to reduce such a large amount of debt. And the timing of the purchase was terrible: the economy was tanking and radio has only partially recovered as digital media buys have overshadowed traditional media.
Since the investors took over, iHeartMedia has steadily lost money and trimmed costs, laying hundreds of employees off and selling assets. The company has about 850 radio stations, by far the most in the country.
Locally, the Atlanta division of what was once called Clear Channel was a bit of a joke for years, its radio stations under-performing throughout most of the 2000s. Some stations switched formats on a dizzying basis. Clear Channel killed off two heritage stations in that time – Peach 94.9 and 96rock – while denuding news/talk WGST-AM. (In 2014, Clear Channel changed its named to iHeartMedia to get rid of the stink of its original name.)
In recent years, the local managers have finally found their footing as 94.9/The Bull for a time beat up on standard-bearer country station Kick 101.5. Top 40 station Power 96.1 has become a powerhouse after debuting in 2012. And Radio 105.7 provides a comfy, low-cost rock alternative to the two primary classic rock stations in town.
This type of public feuding, though, is not a great way to make employees feel secure or draw new ones.
The second largest radio company Atlanta-based Cumulus Media is groaning under a comparatively modest $2.5 billion in debt. It restructured management last year, effectively taking the Dickey brothers out of day-to-day operations.
In a recent call to investors, chief executive officer Mary Berner said the company cut too much talent in an effort to save money, citing Jack Diamond in D.C., Bert Weiss‘ former protege. In fact, Cumulus tried the Bert Show in D.C. in syndication but it didn’t work out. Cumulus ended up rehiring Diamond. She said cutting him in 2014 was “symptomatic of an overzealous focus on expense reduction, without accurate analysis of the potential ratings impact.” That resulted in “a dramatic decline in revenue.”
And it’s clear the new boss isn’t as obsessed with the Nash country branding as her predecessors. The Nash Icon name disappeared in November from Atlanta airwaves at 98.9, replaced with new alternative rock.
Meanwhile, CBS chief Les Moonves said yesterday that he is considering a sale, swap or spinoff of its radio division because it’s not a high-growth business.
CBS owns V-103, 92.9/The Game and 1380/WAOK-AM locally.
Over the years, CBS Atlanta has prided itself on investing in personalities under the eye of long-time GM Rick Caffey.
What does this announcement exactly mean? It’s too soon to say. Due to limits on how many stations any single company can own in a market, both iHeartMedia and Cumulus are maxed out. Besides, as noted earlier, they can’t afford to buy anything. And Cox Media doesn’t have room to grow here either.
Entercom, which owns just a single FM signal here (Star 94) and is in far better financial shape, could potentially add CBS properties here and in other cities. But it’s unclear if Moonves would want to sell its radio stations piecemeal.
What Les Moonves unleashed yesterday was uncertainty – for the industry, and for CBS Radio employees at all 117 stations. One more thought on this subject – there may not be any attractive options available to Les Moonves. He might come back in November and say “We’re not changing anything.”