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SBS Gets OK to Exceed Foreign Investment Benchmark

FCC gives green light to settlement structure

Headshot of Raul Alarcon
Raul Alarcon

The FCC will allow Spanish Broadcasting System to exceed the usual 25% cap on foreign investment.

SBS sought permission for foreign investors to indirectly own up to 49.99% of its equity in the aggregate; the FCC said it received no opposition comments.

According to a commission summary, SBS has been involved in litigation since 2017 concerning, among other things, the application of the foreign ownership rules and the validity of certain stock transactions.

As a result of a settlement in 2021, the plaintiffs are to receive cash and new shares of SBS stock. But some of them are non-U.S. investment funds or include interest holders who aren’t U.S. citizens or business entities.

Under the proposed ownership structure, there would be three classes of SBS stock, but CEO and Chairman Raúl Alarcón, a U.S. citizen, is the only one who would hold an attributable interest, with an approximately 80% voting interest and a 34% equity interest. The rest of the stock would be held by various domestic and foreign investors, but no foreign one would hold more than 5% voting or equity interest.

Among its arguments, SBS said this outcome will allow the company to settle the longstanding dispute, in connection with a “timely refinancing” of its debt that has placed it on a firmer financial footing and “poised for growth as the U.S. economy recovers.” It said the businesses that are acquiring its new common stock are all well-established investment firms.

SBS signed a letter with the Justice Department providing certain assurances; and with that in hand, the FCC said the relevant national security and foreign policy agencies raised no concerns.

The commission said this outcome “provides the company with greater access to foreign capital and thereby contributes to the strengthening of the broadcast industry.”

A 2016 FCC order allows petitions for approval for up to 100% aggregate foreign voting and/or equity investment by foreign investors in the U.S. parent of a broadcast licensee. But the FCC must sign off above certain benchmarks. (SBS in this instance didn’t seek approval for foreign investors to exceed the 25% benchmark for voting interest.)

The company, founded in 1983, owns radio stations in numerous big U.S. Hispanic markets; it also operates AIRE Radio Networks. It owns the MegaTV network television operation, produces concerts and events, and owns digital properties like the LaMusica app and the HitzMaker website.