SBS Seeks FCC Approval For 100% Foreign Ownership.

Spanish Broadcasting System is asking the Federal Communications Commission to clear the way for a sweeping ownership change that would accompany its emergence from Chapter 11 bankruptcy — one that would end CEO Raúl Alarcón’s longtime voting control of the company and potentially put nearly two-thirds of SBS in the hands of foreign investors.

SBS is asking the FCC to allow as much as 100% aggregate foreign ownership of both the equity and voting interests of the reorganized company in a newly-filed petition for declaratory ruling. That represents a significant expansion from the authority SBS won from the Commission in 2023, when regulators allowed foreign investors to own as much as 49.99% of its equity but stopped short of granting similar authority for voting interests.

The request is tied directly to SBS’s ongoing restructuring. Under its prepackaged reorganization plan, all existing SBS stock will be canceled and ownership of the reorganized broadcaster will pass to its former debt holders through newly issued common stock. SBS says the restructuring is designed to significantly reduce its debt and interest burden and put the company on stronger financial footing.

The result will be a dramatically different SBS from the one that went into bankruptcy. Alarcón currently owns or controls nearly all of SBS’s Class B common shares, which carry 10 votes each. Combined with his other holdings, that gives him approximately 35% of the company's equity but 81% of its voting power.

Following the restructuring, SBS says no single person or entity will own 50% or more of the company or have the right to elect a majority of its board. Instead, investment funds that now hold SBS debt would become its owners.

Funds managed by Brigade Capital Management would emerge as the largest block with approximately 42% of SBS. Funds managed by Man Group/Bardin Hill would hold 20%, H.I.G. Capital-managed funds would have 10%, Concise Capital-managed funds about 9%, and MetLife-managed investments about 6%. Together, those five groups account for roughly 87% of the proposed ownership.

The bankruptcy would also produce a sharp increase in SBS’s foreign ownership, including entities or individuals tied to countries including Canada, the Cayman Islands, Ireland, Australia, Italy and Luxembourg, among others. The company estimates non-U.S. investors would hold 67.15% of its equity and 64.13% of its voting interests after the restructuring. That compares with 12.9% foreign equity ownership and just 3.8% foreign voting ownership before bankruptcy.

Familiar Ground

The company’s request brings SBS back to an issue the company addressed with the FCC three years ago. In 2023, the Media Bureau granted SBS authority to exceed the Communications Act’s 25% foreign ownership benchmark and permitted foreign investors to hold as much as 49.99% of its equity.

At the time, however, SBS didn’t seek similar authority for voting interests. That’s because its ownership structure made reaching the 25% foreign voting threshold unlikely unless Alarcón sold a significant portion of his super-voting shares, something SBS told regulators at the time he had “no intention” of doing.

“These circumstances have now changed,” SBS says in its new filing. The company wants the FCC to extend the previous authority to voting interests and permit foreign investors to own as much as 100% of both the equity and voting interests of reorganized SBS.

SBS explains the ownership changes are necessary to complete the Chapter 11 process and says allowing it to emerge with a healthier balance sheet would serve the public interest. The company also points to the FCC’s longstanding policy of accommodating bankruptcy reorganizations where possible and encouraging foreign investment in U.S. broadcasters.

Hoping to speed review, SBS says the investors don’t raise any national security, trade policy or law enforcement red flags and the investment managers are well-established firms operating at the management level in the U.S. — even though some manage foreign-based funds or have foreign parents. It says the review also give Team Telecom an opportunity to review investors requiring specific approval.

The FCC decision is an important piece of SBS’s path out of Chapter 11. Existing noteholders are slated to receive their shares of the newly issued SBS stock, minus what is taken out for a management incentive plan of up to 10%, as well as up to $70 million of new 9.75% senior secured notes due in 2030.