Radio broadcaster Audacy seeks fast-track bankruptcy turnaround

iHeartMedia

08/01/2024 23:12

* 
      Audacy to complete court approval by late February 
    

        * 
      Restructuring would cut debt from $1.9 billion to $350
million
    

        * 
      Company's lenders will take all Audacy equity in the deal
    

  
    By Dietrich Knauth
       Jan 8 (Reuters) - Lawyers for Audacy  AUDA.PK  said on
Monday the radio broadcaster is seeking to complete its
bankruptcy court case in under two months and that it had
already lined up lender support for a $1.6 billion debt
reduction deal when it filed for Chapter 11 protection a day
earlier.
    Audacy, one of the largest radio and podcast companies in
the U.S., filed for bankruptcy in Houston, Texas, with a
pre-negotiated debt deal that would wipe out its existing equity
shares and turn over control of the company to a lender group
that includes hedge funds HG Vora Capital Management, PGIM and
Lakestar Finance.
    Audacy's attorney, Caroline Reckler, told U.S. Bankruptcy
Judge Christopher Lopez that she expects "a smooth, prepackaged
case," with final court approval of the restructuring by
February 21. If the deal is approved, Audacy would emerge from
bankruptcy once it receives U.S. Federal Communications
Commission approval for its change in ownership, a process that
may take "a few months," Reckler said.
    Audacy should be able to move quickly through bankruptcy,
because it obtained support for its restructuring plan from more
than three-quarters of its lenders during six months of
negotiations in the second half of 2023, Reckler said. 
    Lopez granted the company's request for a Feb. 20 court
hearing to approve the restructuring, and allowed the company to
fund its bankruptcy with a new $32 million loan provided by its
existing lender group. 
    Audacy intends to pay junior creditors in full, and it said
that its bankruptcy would not impact operations at its radio
stations or podcasts. 
    Audacy, formerly known as Entercom, said it was forced to
seek bankruptcy protection to address the high costs of its $1.9
billion debt, which largely stemmed from its 2017 acquisition of
CBS radio stations, according to court documents. 
    While that acquisition built Audacy into the second-largest
radio company in the U.S., the COVID-19 pandemic caused a sharp
decline in radio advertising revenue as many workers in the U.S.
stayed home and stopped listening to the radio during their
daily commutes.
    Audacy has invested in podcasts and digital distributions to
match listeners' changing habits, but has been squeezed by
rising debt costs as revenues declined. Audacy accrued $120
million in interest costs on its debt in 2023, and may have had
to file for bankruptcy sooner if its lenders had not granted it
forbearance on scheduled debt payments, according to court
documents.
    Audacy's revenues have begun to recover, but they remain
well below pre-pandemic levels, according to court documents.
Audacy's adjusted earnings for 2022 were $137.9 million, down
nearly 60% from the company's $341.2 million adjusted earnings
in 2019, according to court documents.
    Audacy is a dominant player in local news, sports radio and
music broadcast, operating 225 stations in 45 U.S. markets, and
its podcasts have more than 150 million monthly downloads,
according to court documents. 
    The largest radio company in the U.S., iHeartMedia,
previously filed for bankruptcy in 2018.
    The case is In re Audacy Inc, U.S. Bankruptcy Court for the
Southern District of Texas, No. 24-90004.
    For the debtor: Caroline Reckler of Latham & Watkins
    For first-lien lender ad hoc group: Matthew Williams of
Gibson Dunn & Crutcher
    For second-lien lender ad hoc group: Michael Stamer of Akin
Gump Strauss Hauer & Feld
    
    Read more:
    Spotify launches podcast ad marketplace in 5 countries
  
    CBS to merge its radio business with Entercom 
    Largest U.S. radio company iHeartMedia files for bankruptcy 
  
    US bankruptcies surged 18% in 2023
  

 (Reporting by Dietrich Knauth in New York)