Cumulus Media has filed for Chapter 11 bankruptcy as part of a restructuring agreement between it and its lenders to reduce the company’s debt sheet by more than $1 billion.
Cumulus expects to continue all of its operations as normal through the bankruptcy period as it claims to have enough cash on hand and incoming revenue to support the company through its restructuring allowing it to not seek debtor-in-possession status. The company specifically states that employees will continue to receive pay and benefits and there won’t be any staff reductions or asset sales as a result of being in Chapter 11.
The prepackaged deal reached today was with the lenders that own nearly 69% of the $1.729 billion in term loans and $610 million in unsecured notes. The restructuring will include the cancellation of its common stock as those holders will see their stock eliminated in the reorganized company as the lenders take ownership stakes.
A FAQ sheet for those affected by the bankruptcy is available at https://www.cumulus.com/restructuring/ as well as a hotline at 1-844-429-1668.
Cumulus Media Inc. (OTCQX: CMLS) (the “Company,” “we,” “us,” or “our”) today announced that it has entered into a Restructuring Support Agreement (the “RSA”) with certain of its secured lenders, among others, holding, in the aggregate, approximately 69% of the Company’s term loan to reduce the Company’s debt by more than $1 billion. To implement the balance sheet restructuring contemplated by the RSA, the Company today filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
Cumulus expects all operations, programming and sales to continue as normal throughout this restructuring process. The Company has ample cash on hand, combined with funds generated from ongoing operations, to support the business during the financial restructuring process, and as a result, it does not intend to seek debtor-in-possession (DIP) financing.
Mary Berner, President and Chief Executive Officer of Cumulus Media Inc., said, “Over the last two years, we have focused on implementing a business turnaround to reverse the Company’s multi-year ratings, revenue and EBITDA declines, create a culture that fosters motivated and engaged employees, and build an operational foundation to support the kind of performance we believe Cumulus is capable of delivering. As we have demonstrated in many measurable ways – including increased ratings, revenue market share gains, improved employee satisfaction, reduced employee turnover and, over the last several quarters, our return to year-over-year EBITDA and revenue growth – that turnaround has not only been successful but is continuing. However, as we have noted consistently, the debt overhang left by previous years of underperformance remains a significant financial challenge that we must overcome for our operational turnaround to proceed.”
Ms. Berner continued, “The actions we are taking today to address our balance sheet are a critical step forward for Cumulus. We will use this restructuring process to relieve the financial constraints on our continued progress, allowing us to focus our resources on investing in our business and people to strengthen our competitiveness and ultimately drive growth. We have ample cash to support our operations and service our advertisers, vendors and affiliates during this period, and we look forward to becoming an even stronger partner to all of them when we complete this important phase of our turnaround strategy.”
Ms. Berner concluded, “We appreciate the tremendous efforts of the Cumulus team throughout the business turnaround and thank our employees for continuing to be the true force driving our success.”
Additional information is available at http://www.cumulus.com/restructuring or by calling Cumulus’s Restructuring Hotline, toll-free in the U.S. at 1-844-429-1668. (For calls originating outside of the U.S., please dial 1-503-597-5529.) In addition, court filings and other documents related to the court-supervised proceedings are available on a separate website administered by Cumulus’s claims agent, Epiq, at http://dm.epiq11.com/cumulus.
Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal counsel, PJT Partners, Inc. is acting as financial advisor to Cumulus, and Alvarez & Marsal is serving as restructuring advisor.
Mark W. 
Joseph_Gallant 
Buzzzz
Looks like it’s working now – so I’ll repeat what I was attempting to post earlier:
Chapter 11 and “debtor in possession status” are the same thing. I think what the author of this article meant to say is that Cumulus will not be seeking DIP financing (i.e. post-petition financing).
Also, this is not a true prepack. Only one class of creditors – the term lenders – have signed Restructuring Support Agreements in sufficient number.
The bond holders are a separate class of creditors; few if any of these folks have signed RSAs.
This leaves the door open for the Dickey Family or their allies to file a competing plan. At minimum, I would expect them to file objection motions to any plan put forth by Ms. Berner’s team so as to bide time.
Will Cumulus be forced to dump a lot of the stations, possibly selling for depressed prices??
And is iHeart next??
Joseph it say specifically in the story:
“The company specifically states that employees will continue to receive pay and benefits and there won’t be any staff reductions or asset sales as a result of being in Chapter 11.”
That means they won’t be forced to dump the stations and even if they did sell some assets the creditors want their money back so they would still want full market value.
I would be remiss if I did not mention that only the Debtor (i.e. Cumulus) can file a Plan of Reorganization for consideration during the first 120 days of bankruptcy.
Lew & friends will not be permitted to file a competing plan during that time.
If a Plan is not confirmed prior to day #120, the ability of the Dickey clan to throw a monkey wrench into bankruptcy proceedings will increase considerably.
The Restructuring Term Sheet specifically calls for Cumulus to walk away from all claims owed to Merlin Media.
This means the WLUP/WKQX would be nixed and Merlin would have to resume operation of the stations themselves (unless a new deal acceptable to both parties were reached).
If the Restructuring Term Sheet makes its way into a confirmed Plan, the Term Lenders would be required accept a $400 million+ haircut but would pick up an 83.5% common equity stake . The new $1.3 billion term loan that would be in place upon exit would not mature until May 2022 and would be priced at LIBOR + 4.50%.
The Bond Holders would basically get peanuts . They would share in a 16.5% common equity stake with accepted General Unsecured claims (based on math alone, the vast majority of that 16.5% would go to the bond holders). A 16.5% common equity stake in a company whose enterprise value is barely more than $1 billion and who is carrying $1.3 billion in 1st lien term debt won’t be worth very much.
I would expect them to fight the Plan submitted by Cumulus tooth and nail.
By the way, because the Term Lenders would own 83.5% of the newly issued common equity upon emergence, they would also have the right to appoint 6 of 7 board members. The other board member? That would be Mary Berner, who would remain on board as President & CEO.