The Audacy reorganization has been on a legal fast track, rocketing through the approval process with a prepackaged agreement among its lenders and getting the greenlight in just over six weeks from the Houston court where it chose to file for bankruptcy protection. Now the company is heading to Washington for what will be its last restructuring hurdle as it seeks approval from the Federal Communications Commission. The process may not go as quickly as the Houston court review, in part since Audacy is seeking permission to exceed the current foreign ownership limits.
As previously reported, under the reorganization plan that was approved by the court last month, Audacy will cancel approximately $1.6 billion of existing debt and issue securities in a reorganized, publicly traded company as all existing common stock is cancelled. It says “substantially all” of the newly issued securities will be held by new shareholders.
When the reorganization crosses the finish line, 100 million shares of “new Audacy” will be issued, including 27 million non-voting shares. Laurel Tree Opportunities Corporation and MBX Commercial Finance will become the major shareholders in radio’s second largest group. Laurel Tree, the financial firm with ties to billionaire George Soros, will hold 57 million total shares, including 41 million voting shares, giving them a 41% stake in the company. MBX Commercial, backer of digital news and sports streaming channels, will hold a roughly 9.5% interest.
There are 46 institutional investors who will own shares in the reorganized Audacy, including Bank of America, Goldman Sachs, JP Morgan, Morgan Stanley, and Prudential Insurance (PGIM).
Audacy’s new board will have seven voting members, including CEO David Field. Laurel Tree, will be able to name three of the directors based on its ownership level. The Soros arm has said little about its entry into radio, but the FCC filing offers some hints. It says Laurel Tree’s Fund for Policy Reform will take the lead. The filing describes it as an organization that “makes grants and conducts activities for purposes of promoting social welfare, the common good, and the general welfare of people in communities around the world.”
Foreign Ownership Waiver Sought
The world community is where some of Audacy’s new dollars are coming from. But how much foreign ownership Audacy will have as it starts fresh is not yet entirely clear. The company says current estimates are that as it emerges from bankruptcy it will be over the 25% limit on foreign ownership set by the FCC. Audacy is therefore seeking a waiver to the cap.
Audacy has set up the transaction in a way that will allow the restructuring to be completed and maintain short-term compliance with the foreign ownership limits until it secures approval from the FCC to have indirect foreign ownership of more than 25%. That is critical because other executive branch agencies review waiver requests for national security, law enforcement, foreign policy, or trade policy concerns in a process can take six months or more.
Audacy tells the FCC that if it were to wait for a declaratory ruling from all those agencies involved, it would take months and that “would significantly delay the emergence of Audacy from bankruptcy, which would impose substantial burdens on the company.” It points out the special warrant structure and “limited waiver” proposed in its application is no different than what was allowed in the Alpha Media and LBI Media bankruptcies.
“The expedited emergence of Audacy from bankruptcy with substantially less debt and improved operational arrangements will preserve current radio broadcast operations and allow reorganized Audacy to remain a competitive radio broadcaster,” it says in the filing.
Spinning In South Carolina
With 235 stations across 48 radio markets, Audacy’s restructuring would have had a bigger impact on its portfolio had it not been for the 2017 CBS Radio merger that led to several over-the-limit clusters being downsized. But because Nielsen changed the market definition of Greenville-Spartanburg, SC market since then, Audacy currently owns one more grandfathered FM than would be permitted under current rules. As a result, it will spin AC “Magic 106.3” WSPA-FM into a divestiture trust for sale to bring its Greenville-Spartanburg cluster into compliance. In a market that size, Audacy is allowed to have up to seven full-power stations.
Audacy also makes the case for why it should be allowed to keep rock “93.3 The Planet Rocks” WTPT. Its city of license is Forest City, NC, which is no longer part of the Greenville-Spartanburg market.
Soros-backed Laurel Tree also controls a third of Latino Media Network, which last year bought 18 stations from TelevisaUnivision. But in the markets where LMN overlaps with Audacy – Los Angeles, Dallas, Houston, Miami, and Las Vegas – Audacy will still comply with local radio ownership limits.
The FCC will also need to decide if it will allow Audacy to continue to own an expanded band AM station in the Kansas City market. The company currently has a waiver to own nine stations in the market, and it is asking that it be allowed to keep sports “1660 The Score” KWOD along with the other eight stations it owns in Kansas City.
While an Audacy spokesperson declined to comment on the FCC filing, the company earlier said that it is off to a “strong start” to 2024 with the court approval for its reorganization plan on Feb. 20 giving it a symbolic tailwind. “We look forward to a bright future,” CEO David Field said last week, “capitalizing on our best-in-class balance sheet and our scaled leadership position in the dynamic audio market, distinguished by our exclusive premium content and top positions across the country’s largest markets.”