Judge Rejects Cumulus Refinancing Plan

Stock down 25% Friday after deeper drop

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 lower earlier.

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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.

Analyst 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 go.

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.

If 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.

Cumulus 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.

Cumulus 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.


 



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