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Cumulus Owes Equipment and Service Suppliers

BGS, GatesAir are among unsecured creditors that are owed substantial sums

Several familiar broadcast equipment suppliers are prominent on the list of top 20 unsecured creditors of Cumulus Media as it continues down the path of court-supervised reorganization.

Equipment dealer Broadcasters General Store is likely bracing for a hit since they have the third largest amount due on the list. A bank occupies the top slot.

Cumulus owes BGS about $967,000, according to documents filed in the Chapter 11 reorganization. The document shows the total of unsecured debt at the time of Cumulus’ voluntary filing late last November. The list of unsecured claims at the time also included royalties collector BMI at about $790,000.

Another familiar equipment supplier on the unsecured party list is GatesAir Inc., which is owed $45,596. Other suppliers and vendors who have filed claims include 305 Broadcast LLC and WideOrbit. Even fellow broadcasters like iHeartMedia and Cox Media have filed financial claims.

[Read more about how industry suppliers see the 2018 business outlook.]

Cumulus owed Nielsen $6.6 million at the time of the voluntary filing last year but later made a specific motion request in U.S. Bankruptcy Court in the Southern District of New York to continue the Nielsen contract, according to those familiar with developments. As a result Cumulus paid Nielsen in full and the contract is now in good standing.

Secured lenders are set to emerge from the broadcaster’s voluntary bankruptcy with an 83.5% equity stake in the emerging company, which could happen as soon as the end of May; but the restructuring won’t treat unsecured creditors as well. The more than $600 million Cumulus owes unsecured creditors, which is to be forgiven upon its exit from bankruptcy, will likely result in that group getting the remaining 16.5 % equity in reorganized Cumulus, according to the broadcaster’s reorganization plan.

An observer familiar with United States bankruptcy law but with no connection to the Cumulus filing says it’s likely the broadcaster has identified suppliers and vendors that provide it key goods and services and filed motions for them to receive preferred treatment on pre-petition debt. “And from a vendor’s point of view it is often more important to at least get some partial payment up front and have a customer rather than not have a customer when this is over,” according to this legal expert, who specializes in business insolvency and bankruptcy.

Cumulus, which was $2.4 billion in debt at the time of its Chapter 11 filing last year, has a critical meeting of creditors on Feb. 27 as part of its court-supervised proceeding.