Text has been updated with comment from Cumulus on the court ruling.
Cumulus Media stock took a wild spin on the
NASDAQ stock exchange Friday, one that appears to have been prompted by a court
setback. The stock closed down almost 25% for the day after having hurtled even
Reuters reported that a U.S. judge rejected
Cumulus Media Inc.’s bid to proceed with a refinancing plan as part of a
lawsuit that the big U.S. radio network hoped would help reduce its $2.4
billion debt load.
It appears at least one lender, JP Morgan
Chase & Co., opposed the plan, according to Reuters. Atlanta-based Cumulus
filed a lawsuit in December, accusing JP Morgan Chase of withholding consent to
parts of its refinancing plan.
Reuters said the decision Friday
morning by U.S. District Judge Katherine Polk Failla in Manhattan set off a
flurry of trading of Cumulus stock around midday. The stock opened the day at
$1 per share but closed at 76 cents, according to MarketWatch and Yahoo Business charts. At one point the stock was trading at 60 cents
per share. Trading volume was heavy with nearly 1.8 million shares changing hands,
far more than usual.
Cumulus’ lawsuit, filed in U.S. District
Court, Southern District of New York, stemmed from its efforts to reduce its
debt load, which includes $1.8 billion in secured loans and $610 million of
unsecured senior notes due in 2019, according to Reuters.
Todd Antonelli, managing director of strategy at Berkeley Research Group, said the
rejection of Cumulus’ refinancing plan is bad news for Cumulus, currently the
country’s second largest radio broadcaster. He told Radio World in an e-mail Friday
that the broadcaster “would likely enter bankruptcy” if the overall refinancing plan didn’t
In response to queries from Radio World, the company replied with a statement about the legal decision: “While
we are certainly disappointed by the court's decision, we will continue to
review all available options to address our balance sheet issues. We are making
solid progress in our turnaround, and remain focused on exploring strategies
that would give us the runway needed to fully execute our plan.”
The stock tumble followed a downward trend since Cumulus jumped through multiple financial hoops last fall to stave off de-listing
from the NASDAQ exchange. The broadcaster propped up its stock price via a
reverse stock split in October, which meant every eight shares of each class of
Cumulus stock was converted into one share.
The move last
fall allowed Cumulus to regain compliance with minimum listing requirements of
$1 per share. Shares of Cumulus Media Inc.’s are traded as CMLS on the NASDAQ.
Cumulus stock is stuck below the $1 minimum for a period of 30 consecutive
days, NASDAQ would send it a deficiency notice, according to the NASDAQ website.
Once a deficiency notice has been
sent, the company would have 180 days to comply with the continued listing
standards of a sub-$1 share price.But
that scenario seems like the least of Cumulus’ worries at the moment.
CEO Mary Berner’s turnaround plan for the broadcaster has so far not helped the
company’s stock price. When Berner joined the company in September 2015, the
company’s stock price was hovering around 75 cents per share, roughly where it closed
today — but that was before last year’s 8-for-1 reverse stock split.
owns approximately 450 radio stations and operates in 90 U.S. media markets. The
company plans to release its fourth quarter 2016 earnings report and full-year
recap sometime in mid-March, according to a Cumulus spokesperson.