As expected, Audacy has begun prepackaged chapter 11 proceedings in U.S. Bankruptcy Court for the Southern District of Texas to restructure its balance sheet and slash its total debt from $1.9 billion to $350 million. In a Sunday morning announcement, first reported by Inside Radio in a Breaking News Alert, radio’s second largest ownership group says it has reached an agreement with a “supermajority” of its debtholders on a deleveraging transaction that will erase over 80% of the company’s debt, or roughly $1.6 billion, and “establish a robust capital structure to drive long-term growth.”
In its petition for bankruptcy, Audacy listed total assets of $2.79 billion and total debt of $2.66 billion.
In a debt-for-equity swap, Audacy’s debtholders will receive an ownership stake in the reorganized company. Audacy says it expects that the court will hold a hearing to consider the approval of the reorganization plan in February and to emerge from bankruptcy once the FCC has approved the transaction.
‘Business As Usual’
Despite the arduous bankruptcy process, Audacy says it will continue to operate “business as usual” and that trade and other unsecured creditors will not be impaired.
“Over the past few years, we have strategically transformed Audacy into a leading, scaled multi-platform audio content and entertainment company through our acquisition of CBS Radio and by building leading complementary positions in podcasting, audio networks, live events, digital marketing solutions and our direct-to-consumer streaming platform,” Chairman, President and CEO David Field said in a statement. “While our transformation has enhanced our competitive position, the perfect storm of sustained macroeconomic challenges over the past four years facing the traditional advertising market has led to a sharp reduction of several billion dollars in cumulative radio ad spending. These market factors have severely impacted our financial condition and necessitated our balance sheet restructuring. With our scaled leadership position, our uniquely differentiated premium audio content and a robust capital structure, we believe Audacy will emerge well positioned to continue its innovation and growth in the dynamic audio business.”
Along with the Chapter 11 petitions, Audacy has filed a proposed Plan of Reorganization that includes the terms of the restructuring agreement and is subject to court approval.
Audacy says it expects to operate normally during the bankruptcy process under its current leadership team.
Lenders Provide $57 Million Cash Infusion
To keep the company afloat during the restructuring and fulfill commitments to employees, advertisers, partners and vendors, some of Audacy’s existing lenders have committed $57 million in debtor-in-possession financing. The cash infusion, which is subject to court approval, includes a new $32 million term loan and a $25 million upsize of Audacy’s existing accounts receivables financing facility from $75 million to $100 million.
The financial challenges faced by Audacy are rooted in diminishing revenue and widening net losses, primarily attributed to a downturn in ad spending. The prospect of a bankruptcy filing has been on the table since May 2023, when the company added “going concern” language to its annual financial report. That’s an accounting term used to identify whether a company is likely to survive the next year.
Months Of Negotiations With Debtholders
Last July, Audacy said it had begun negotiations with its lenders to restructure its debt. In October it disclosed that it didn’t make an $18 million loan interest payment that was due Sept. 30 as it continued talks with lenders. One month later, the company increased the size of its board from eight to nine directors, with the addition of Roger Meltzer, the Chairman Emeritus of the law firm DLA Piper, to chair a newly created Special Review Committee focused on restructuring. In December Audacy signed a 12th amendment to its credit agreement giving it another 68 days to reach an agreement without sliding into a technical default on $18.9 million in loans.
Calming The Troops
In a memo to employees Sunday morning, Field said the restructuring will put Audacy “on a strong financial footing,” bolster its competitive position and set it up for growth in the years ahead. “This resolution comes after many months of discussions with our debtholders to address our balance sheet issues in the wake of the perfect storm we have faced over the past four years from the global pandemic and the series of subsequent macroeconomic challenges that have caused sustained headwinds in traditional advertising and materially impacted our business,” Field told employees in the memo.
He characterized the bankruptcy process ahead as a “positive step forward for Audacy and our stakeholders, including our employees, advertisers, partners, vendors and listeners” and said the company will emerge stronger than before.
Like other broadcast companies that have taken the chapter 11 route, Field stressed that during the lengthy process, the company will continue normal everyday operations and will retain all of its key assets and capabilities. “There will be no disruption to your wages and benefits. Our current leadership team will continue to lead the Company and day-to-day roles and responsibilities will not change,” Field said. “Overall, it will be business as usual as we remain relentlessly focused on serving our listeners, customers and partners with excellence, executing our strategic growth and development plans and achieving our goals.”
Getting ahead of the turbulence that can accompany a bankruptcy filing, Audacy is informing its advertisers and partners about the restructuring.
Field will host a webinar for employees on Monday to provide additional details about the restructuring.
During the chapter 11 process, Audacy’s common stock will continue to trade over-the-counter under the symbol “AUDA.” However, the shares are expected to be canceled and receive no distribution as part of the restructuring.