Cumulus Media has begun talks with a pair of separate credit groups to restructure its $2.4 billion in of debt, according to the Wall Street Journal. The talks could lead to an out of court settlement or a bankruptcy filing, unnamed sources tell the paper.
The separate tracks of conversations are with the holders of $1.8 billion in term loans, as well as with a group of bondholders.
Cumulus has been wrestling with how to restructure its debt since February when a U.S. District Court judge rejected the broadcaster’s bid to move forward with a refinancing plan with bondholders that would have extended the maturity on its unsecured notes in exchange for a one-third equity stake in the company and $305 million in new secured debt. The decision came after a group of holders of $1.8 billion in Cumulus term loans challenged the debt exchange.
Pushing out the maturities on the junior bonds had been a top priority for the company since a provision in its credit agreement moves up the due date on its much larger term loan to January 2019 from 2020 if more than $200 million of the notes remain unpaid. Cumulus has $610 million in bonds set to mature in May 2019.
“While Cumulus and its advisers are in talks with lenders and bondholders, the situation remains fluid and an out-of-court debt restructuring remains possible,” The Journal reports.
As it works to hammer out a restructuring, Cumulus has some wind in its sails. For the first time in more than three years, the company reported an increase in EBIDTA (earnings before interest, tax, depreciation and amortization –an approximation of cash flow) and a 1.2% increase in net revenue second for the second quarter. That period also marked the seventh straight quarter of PPM ratings share growth.
Berner addressed the strain the debt load is having on the company’s operations during its second quarter earnings call in August. “Our heavy debt load continues to constrain both our ability to do business in the short term and achieve our full potential in the long term,” she said. “So we continue to explore options which we hope will allow us to reduce our leverage with minimal disruption to our operation and the progress we continue to make.”
Jeffrey Marcus, partner at Crestview Partners, which owns a minority stake in the company, told the Journal in an email, “Speaking for the Board, we are very impressed with the turnaround that Mary Berner and her management team have accomplished. We hope the lenders will recognize the progress that is being made and will take all steps necessary to continue the momentum.”