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Bustos Media works to restructure.

 

Privately-held Bustos Media is technically in default with its lenders.  It has missed some payments and has broken loan covenant agreements.  The company isn’t alone.  But unlike other radio groups, CEO and founder Amador Bustos believes that by keeping his employees informed about what’s happening, he’ll ease fears and encourage teamwork --and help turn the situation around.

“I’m not able to do it by myself,” says Bustos. “It requires the understanding and support of all our employees.”  He says response has been “terrific” considering the situation, and while some competitors have tried to use their situation to their advantage, Bustos feels the impact on operations has been minimal. His message is there’s no threat of bankruptcy or liquidation.  Bustos says, “Our lenders are being very cooperative.”  He declined to reveal a specific figure owed, but says it’s less than $100 million.

The banks have hired veteran radio executive Jay Meyers to work with Bustos on fine-tuning operations.  But Meyers tells Inside Radio it’s a long way from a takeover.  “The lenders are working in a very friendly way with Amador Bustos for an orderly fix of their problems,” he explains.  Alta Communications’ Brian McNeill confirms, “The lenders and investors are very much in support of Amador Bustos and the existing management team.”

The lenders have even signaled they’re willing to taking advantage of low prices and buy additional stations. That’s not to say there won’t be some pain. Bustos says, “We’ll all take a haircut on the equity.”  The Bustos family holds about 10% of the equity now, with the remainder held by Alta, Providence Equity Partners and Opportunity Capital Partners.  Bustos says, “Hopefully, we’ll end up with some significant recovery down the road.  I’m estimating it will take us three years to get back to where we started.”

Bustos continues, “This is a problem that’s endemic to the industry.”  Bustos Media’s 28-station portfolio was assembled between 2004 and 2007 to target Hispanics in mid-sized markets.  But as its last deals were closing, radio revenues began a multi-year free-fall. Bustos concedes, “We happened to buy at the high point and made estimates that didn’t prove to be accurate.”  As advertising dried-up, there simply wasn’t enough to service the debt. It’s a story familiar across radio Bustos notes, with dozens of companies in negotiations with their lenders.  A few have even filed Chapter 11.

Bustos Media is a second act for Amador and John Bustos, who successfully built the 32-station Z Spanish Network in the 1990s before selling to Entravision for $475 million in 2000.  Today, Amador Bustos says, “I would sell anything that would fetch a price that would help alleviate some of the financial pressure.  But the reality is there aren’t buyers for much of anything.”  He suspects they’ll need to wait another two or three years before recouping their investment.  The forthcoming 2010 Census results could help increase the value of their stations by putting numbers behind the growth of the Hispanic marketplace.

“It is disappointing that clearly Bustos Media hasn’t been as successful as Z Spanish — the stars didn’t align even though we operated as lean and efficient as we did before,” he says.  Even with plans to eventually sell the company in a few years, Bustos won’t rule a third act — such as building another radio company.  He says, “I’m clearly not discouraged or down on the industry.”




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