Wednesday, December 28, 2016

Report: Cumulus Hints At Bankruptcy

Cumulus Media has scheduled a special shareholder meeting for Jan. 26 to vote on a debt-for-equity swap. According to InsideRadio, it comes with a warning to stock owners that if they don’t go along with the maneuver it could send the company down the path to bankruptcy.

In a signal Cumulus may be having trouble getting some debtholders onboard the proposed swap, the company has pushed back the deadline for takers. It extended the so-called “early tender” deadline—which carries an 11% cash premium for debtholders who jump early—to Jan. 10, 2017. The previous deadline had been Dec. 23.

For now, the overall time line for the swap remains the same as Cumulus previously set—Jan. 10 as the expiration date for the exchange offer. And the company hasn’t sweetened the pot as of yet, keeping all other terms and conditions of the exchange as they were when the swap was announced in mid-December. In addition to a cash payout, the company says debtholders will receive 24.016 shares of Cumulus common stock for each $1,000 in outstanding notes tendered.

At next month’s special meeting, shareholders are being asked to issue new stock in connection with the offering. A regulatory filing says if all $610 million in outstanding notes up for exchange are tendered, Cumulus would issue up to 14,647,930 new shares of Class A stock. That would increase the total number shares of its common stock by as much as one-third. So far, the company reports it has commitments from lenders holding $349.7 million in outstanding loans—or, 57.3% of the outstanding notes coming due in 2019—to take part in the swap.

How high are the stakes? Cumulus tells shareholders if the debt-for-equity swap fails it will consider all refinancing alternatives, but cautions a “viable refinancing alternative arrangement may not be available.” Even if one is within reach, the company says the terms may not be as favorable to its creditors as what they’re putting on the table. “Such alternatives may be expensive and may have an uncertain time line,” the company says, warning, “We may be required to seek protection from our creditors through a bankruptcy filing.”

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