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Cumulus to Restructure Using Chapter 11

Operations should continue uninterrupted in a debt-for-equity deal

Cumulus Media says it has made significant process in its turnaround and feels it has cleared its highest hurdle to date to accomplish that with an agreement late Wednesday to enter a restructuring deal with some if its secured lenders. The agreement hinges on a voluntary court-supervised Chapter 11filing which means the broadcaster will keeps its business alive while trimming its debt by just over $1 billion.

The company, mired in approximately $2.4 billion debt, entered into a Restructuring Support Agreement with lenders holding almost 70% of the company’s term loan. Cumulus doesn’t expect any disruptions in operations nor does it envision staff reductions as a result of the debt-for-equity deal.

Cumulus President and CEO Mary Berner has been talking ratings, culture change and pushing a financial turnaround forward since joining Cumulus in 2015 while remaining realistic that the company’s big pile of debt in its current form was nearly impossible to overcome.

The company even tried a 1-for-8 reverse stock split in 2016 that ultimately failed to boost its stock price. In fact, Cumulus was delisted from the NASDAQ stock market earlier this month after it fell out of compliance and now trades on the over the counter market. That may not matter since the company said based upon the terms of the agreement that it reached with the secured lenders, the company’s current common stock will be “canceled and will not receive a recovery in the restructuring.” The company’s stock price was $0.06 a share at one point Thursday afternoon.

The company said on Wednesday it has ample cash on hand and expects all operations, programming and sales to continue as normal throughout the restructuring process.

“The actions we are taking today to address our balance sheet are a critical step forward for Cumulus. We will use this restructuring process to relieve the financial constraints on our continued progress, allowing us to focus our resources on investing in our business and people to strengthen our competitiveness and ultimately drive growth,” Berner said in a press release.

Cumulus’ quarterly earning numbers have been looking better, analysts say. As for the quarter ending September 30, Cumulus posted net revenue of $287.2 million, which is up 0.4% from one year ago. The income column’s bottom line was weak but on the positive side with a $1.3 million profit in the third quarter of 2017.

Todd Antonelli, managing director at Berkeley Research Group in Chicago where he follows media stocks, reacted to the Cumulus filing by telling Radio World: “Cumulus needs to bring their brick and mortar radio station offerings into the 21st century. Innovation and alignment to the shifts and changes in the way we all interact with media on multiple devices may allow Cumulus to emerge successfully as a go-to platform for real time entertainment and interaction in the auto, on our phones, and at home.”

Berner, who joined Cumulus after the ouster of company Founder/CEO Lew Dickey, has been through a prepackaged bankruptcy before. She was CEO of Reader’s Digest Association when it entered the Chapter 11 process in 2009.

Cumulus has 446 owned-and-operated stations broadcasting in 90 U.S. markets and approximately 8,000 broadcast radio stations affiliated with its Westwood One network.