Emmis 375

Two months after signing final contracts with Hubbard and Entercom to sell its St. Louis cluster, Emmis on Monday said it had closed both deals. At closing Emmis received $60 million for the stations – $45 million from Hubbard for heritage rock KSHE (94.7) and modern rock “105.7 The Point” KPNT, and $15 million from Entercom for “FM News Talk 97.1” KFTK-FM and CHR “Now 96.3” KNOU.

After deducting $15.9 million in estimated taxes and transaction-related expenses, Emmis says it realized net proceeds of $40.5 million to pay down debt on its senior credit facility. But Emmis has until May 2019 to pay taxes on the deals so the company says it will repay outstanding amounts on its revolver loan and will hold excess cash on its balance sheet to enhance liquidity.

Hubbard and Entercom took over the stations under Local Marketing Agreements that started Mar. 1, ending their 34 years under Emmis ownership.

The sales settled ahead of schedule for Emmis, which was shooting to close the transactions in its first fiscal quarter, which ends May 31. But it was to the buyers’ advantage to close the deals by the end of April. Under LMA terms spelled out in the purchase agreement, Entercom was to pay Emmis $49,820 per month for March and April before the fee would have ballooned to $175,474 in May. Hubbard had a similar incentive to close the deal by the end of April. Its LMA called for monthly payments to Emmis of $321,828 per month for March and April, before more than doubling to $714,196 in May.

The four Emmis St. Louis stations collectively produced $23.85 million in net revenue during the company’s fiscal year ended Feb. 29, 2017, up from $21.29 million the year before. The cluster generated operating income of $3.47 million in Emmis’ 2017 fiscal year, more than double the $1.16 million in 2016.