As it looks to pay down debt and reduce its leverage ratio, Salem Media Group is contemplating selling some of its non-core stations and assets, the company said this week. Speaking to analysts on its quarterly earnings call, CEO Ed Atsinger said the Christian media and conservative talk-focused company has compiled a hit list of stations to potentially put on the block. But whether it would part with them depends on the prices today’s market would fetch.
“We’ve gone through our entire list of assets and we’ve identified those that are less strategic that we would be willing to sell,” Atsinger said Tuesday. “We’ve identified prices that would make sense for us; and if those properties can attract those kinds of prices, it’s very likely that we will do some sales.”
Salem has been both a buyer and seller during the past year. From April through September 2018, it closed on $6.7 million in acquisitions, including “860 AM The Answer” KTRB San Francisco for $5.1 million. On the other side of the deal table, Salem closed on the sale of five radio stations from May to October 2018, including outlets in Omaha, Miami and Boston for a combined $8.8 million. Salem also closed on two land sales in the greater Los Angeles and San Diego areas for an additional $1.1 million.
It’s also noteworthy what Salem didn’t buy. Last April, the company elected not to exercise an option to buy what had been talk “96.5 The Answer” KHTE-FM Little Rock for $1.2 million and stopped programing the station under a time brokerage agreement, opting to pay a $100,000 fee for not going through with the purchase.
Salem already has a few stations cued up for a spin. In December Salem reached an agreement in principle to sell its Louisville stations, including religious teaching “The Spirit” WFIA-FM (94.7), news/talk “970 AM The Answer” WGTK, and WFIA (900) which simulcasts noncommercial contemporary Christian WJIE-FM. Buyer Word Broadcasting has been operating the cluster under a time brokerage agreement since January 2017.
How Many Stations TBD
While unloading “less strategic” stations and real estate could help Salem reduce debt, Atsinger stopped short of enumerating the number of stations it has on its target list or how much it aims to raise from divestitures. “We always have discussions underway and there are always a few things in the works,” he said in response to an analyst’s question. “I couldn’t quantify it for you specifically in terms of how much, but I think there’s a substantial opportunity to raise some capital that would be more strategically employed taking down debt. If we can get the prices for those assets that we think that they should command and we’re going to pursue that aggressively.”
One of the stations Salem sold last year was WBIX (1260) Boston, one of 10 signals it acquired from Disney in 2015. Along with its transmitter site and three towers, WIBX brought $1.735 million to Salem. “We sold it for more than we bought it from Disney,” Atsinger boasted. In addition to the Boston station not working out as planned, the St. Louis station Salem acquired from the Mouse House—urban “Praise 1260” WSDZ—“is still a bit of a drag,” Atsinger said. “We’ve made some substantial progress there,” he explained, hiring new “talent that has brought some new business.”
While there are a few trouble spots, CFO Evan Masyr said about two thirds of the stations it got in the Disney parcel are up to snuff. “Generally, we’ve been pleased more than we haven’t been with the stations,” Masyr said.
And the majority of former Disney stations came with valuable real estate, creating other monetization options for the company. “Those create additional opportunities to spin that off, in some cases, for more than we paid for the total asset package,” Atsinger said.
The ultimate goal is to reduce the company’s leverage ratio to “somewhere between four and five [times] and ideally, even lower than that if we get there,” Atsinger said.
During fourth quarter, Salem used cash proceeds from the $1.4 million sale of KCRO (660) and KOTK (1420) Omaha and from the $300,000 sale of website Human Events, along with cash on hand, to buy back $6.4 million of its bonds at a discount. Salem paid $5.9 million for the bonds at an average price of 91 cents on the dollar. Throughout 2018, Salem repurchased $16.4 million of its bonds for $15.4 million for an average price of 94 cents on the dollar. The plan, according to Masyr, is to use proceeds from asset sales to continue to “pare down debt and take advantage of the opportunity with our bonds trading at a discount.”
Atsinger and Masyr are also working to scale back Salem’s workforce. Two weeks ago Salem eliminated 35 positions. Factoring in other cost savings, the company said that should deliver about $2.8 million in annualized savings. “In the current environment this is necessary to be more efficient, given the challenges in the marketplace today,” Atsinger offered.