Cumulus November bond payment pivotal in jumpstarting workout talks, NDAs to make rounds

13 September 2017

Cumulus Media’s upcoming November bond payment will serve as a window for the distressed radio station operator to once again kick start restructuring talks with its investors, according to three sources familiar with the matter and a buysider following the situation. To that end, the company is looking to get lenders to sign non-disclosure agreements so negotiations for a deal can kick off shortly, two of the sources said.

 

The issuer on 1 November faces a semi-annual USD 23.6m interest payment on its 7.75% senior unsecured notes due 2019. Cumulus is expected to skip the coupon given that the notes are deeply distressed and secured lenders have incentive to pressure management to prevent cash leakage. As such, the interest due date serves as the likely turning point to a drawn out debt restructuring process that started 1.5 years ago, the sources said.

 

Back then, the company attempted but ultimately failed to push through an exchange that stood to dilute its lenders. The deal was structured to swap the borrower’s USD 610m 7.75% notes at into a revolving loan at a discount as well as collect an equity stake in the company. US District Judge Katherine Polk Failla of the Southern District of New York, however, thwarted the deal with a conclusion that Cumulus’ credit agreement did not permit the proposed refinancing.

 

The media company has been working with PJT Partners and Kirkland & Ellis as advisors. Cumulus is also advised by Paul Basta, who recently resigned from Kirkland, but is still performing client work on Cumulus’ behalf, one of the sources noted.

 

The issuer most recently reported a 6.7% jump in adjusted EBITDA to USD 67.4m, as net revenue inched up 1.2% to USD 290.5m for 2Q17, compared to the same period a year ago. It held USD 141.2m of cash on its balance sheet at the time. Subsequent to quarter-end, Cumulus used proceeds from the sale of certain land and buildings in Los Angeles, California to repay approximately USD 81.7m of term loan borrowings.

 

 

The borrower’s 7.75% bonds last changed hands at 28.25 on 11 September, according to MarketAxess. The remaining USD 1.7bn outstanding on its Libor+ 325bps (1% floor) term loan due 2020 is quoted 81.333/82.625 on Markit.

 

A company representative declined comment.