Monday, April 27, 2009

Restructuring An Entire Industry (Radio)

If predictions from the NAB Show are correct (and I believe they might be), the radio industry will undergo a complete financial restructuring in the next 12 to 24 months. A massive amount of debt will be converted to equity and/or written off. Yet there will be winners and losers.

Broadcast companies will be divided into two distinct camps by their lenders:

1) Good operators with bad balance sheets

2) Bad operators with bad balance sheets

Fortunately, there are a few operators with good balance sheets, but very few.

Good Operators with Bad Balance Sheets

  • Excess debt will be converted to equity; remaining debt will be restructured with payment terms matching the companies' ability to pay.
  • Owners will keep a stake and management will keep their jobs and be incentivized to perform under the new arrangement.

Bad Operators with Bad Balance Sheets

  • Lenders will adopt a "throw out the bums" mentality.
  • Assets will be liquidated, or in some cases, sold to entrepreneurs (and financed by the lender) who know how to make the business work.

So who are the winners and losers?


  • Lenders who stay calm, carefully analyze their problems and possible solutions.
  • Existing broadcasters without a leverage problem, particularly if they want to grow their business.
  • Existing broadcasters who become pro-active in dealing with their problems.
  • Entrepreneurs who know how to operate (and have been patiently waiting for a window to get in).
  • Attorneys and smart, experienced broadcast restructuring consultants.
  • Smart distressed debt buyers who pair up with entrepreneurial operators.


  • Over-leveraged and under-operated broadcasting companies.
  • Lenders who panic.
  • Investors who bought into the over-leveraged and under-operated broadcasting companies.

Those are my thoughts . . . what are yours?

Media Services Group