Audacy officially files for Chapter 11 reorganization

[A1B1C1D1]

On a kinda related note, Salem Media is about to get delisted for a low stock price. The Conservative/Evangelical company will need ad spending in an election year to keep it afloat. They continue to sell off pieces of the company while praying for a recovery.

[MWmetalhead]

There are some elements in the plan of reorganization that suggest there is a good possibility David Field will depart later this year.

[MWmetalhead]

Here is the text of a post I made elsewhere yesterday:

The page numbers below refer to this document:
https://document.epiq11.com/document/ge ... ctCode=AUD

David Field's employment agreement:
Per page 318 of 595 of the combined disclosure statement / plan of reorganization PDF (this page is actually part of the Restructuring Support Agreement that was agreed to between the Company and the Creditors prior to the BK filing):

David Field’s employment agreement to be modified prior to chapter 11 filing as follows:

i. If a long-term employment agreement is negotiated within 120 days after the Plan Effective Date, then that agreement would supersede the agreement existing as of the Petition Date;

ii. Mr. Field will remain on New Board in a non-Chairman capacity while still employed and to serve in consulting role on New Board member selection (but without voting role for selection);

iii. Reorganized Audacy can terminate Mr. Field’s employment agreement following the Plan Effective Date, in which case Mr. Field would assist with transition and receive salary through the later of (i) the end of the transition period referred to in clause (iv) below or (ii) December 31, 2024, plus severance prorated “earned” bonus; and

iv. If no agreement on long-term employment is reached within 120 days following the Plan Effective Date, then Mr. Field can terminate by providing notice after 120 days and before 150 days following the Plan Effective Date; however, Mr. Field is required to transition for the earlier of 150 days or until a successor CEO is appointed, during which period Mr. Field would only receive (i) contract severance and (ii) base salary during the transition period (without a prorated bonus).

Board of Director appointment rights:
Per page 53 of 595 of the combined disclosure statement / plan of reorganization PDF to which I linked this morning:

"As of the Effective Date, the terms of the current members of the board of directors of Parent shall expire and the New Board shall be appointed. Except to the extent that a current director on the board of directors of Parent is designated to serve on the New Board, the current directors on the board of directors of Parent prior to the Effective Date, in their capacities as such, shall be deemed to have resigned or shall otherwise cease to be a director of Parent on the Effective Date. Each independent director of the Debtors, in such capacity, shall not have any of his/her respective privileged and confidential documents, communications, or information transferred (or deemed transferred) to the Reorganized Debtors, Reorganized Parent, or any other Entity without such director’s prior written consent."

Per page 316:
"The board of directors of Reorganized Audacy (the “New Board”) shall be comprised of seven (7) members selected as follows: (a) Five (5) members selected by the Ad Hoc First Lien Group, (b) One (1) member selected by the Ad Hoc Second Lien Group (which member must be to the reasonable satisfaction of the Required Consenting First Lien Lenders and be an “industry” expert or specialist), and (c) David Field while employed by Reorganized Audacy.

To summarize:
- David Field (to the extent he remains employed) will continue to serve on the Board but cannot be the Chairman.
- The prepetition First Lien lenders will (indirectly) appoint five board members.
- The prepetition Second Lien lenders will (indirectly) appoint one board member.
- I wrote "indirectly" because the above lender groups will not appoint board members directly. Instead, third-party advisors they've retained will make the appointments. The advisor names can be found at the bottom of page 175 and top of page 176.

Will the Reorganized Company be privately owned or publicly traded?
Privately owned.

Per page 316 of 595: "Reorganized Audacy will be a private company, to the extent permitted by applicable law. New Governance Documents for Reorganized Audacy following the Plan Effective Date shall contain customary protections for minority equity holders in form and substance acceptable to the Required Consenting Second Lien Noteholders."

Warrants:
There are "Special Warrants" and "New Second Lien Warrants."

The New Second Lien Warrants are exercisable within four years if Equity Value (not to be confused with enterprise value) exceeds $771 million. Bear in mind day one equity value is estimated to be a range of $250 million to $450 million (since opening funded debt is expected to be $350 million and the opening enterprise value range is $600 million to $800 million). It is certainly possible these Warrants will expire without ever being "in the money," in which case, they'd be worthless.

The New Second Lien Warrants also have what is known as Black-Scholes protection in the first two years of existence. This primarily would come into play if the Company were to be sold.

More info on that concept can be found here: Avoiding Illusory Recoveries: The Importance Of Black-Scholes Protections For Warrants Issued Under A Bankruptcy Plan - Commodities/Derivatives/Stock Exchanges - United States.

The Special Warrants appear to be an optional tool to address potential FCC compliance issues. Per page 65 of 595:

"The Debtors shall file the required FCC Short Form Application(s) and the FCC Interim Long Form Application(s) as promptly as practicable following the Petition Date and in accordance with the Restructuring Support Agreement.

The Debtors shall file a Petition for Declaratory Ruling and FCC Second Long Form Application (if applicable) after the Effective Date (and if applicable, in accordance with any FCC requirements) and, if such filings are made prior to the Effective Date, their grant shall not be a condition to Consummation. After the filing of the FCC Interim Long Form Application(s), any person who thereafter acquires a DIP Claim, a First Lien Claim, or a Second Lien Notes Claim may be issued Special Warrants in lieu of any New Common Stock that would otherwise be issued to such Person under the Plan to the extent that the issuance of New Common Stock would be inconsistent with the Communications Laws and/or the FCC Interim Long Form Approval.

In addition, the Debtors may, with the consent of the Required Consenting First Lien Lenders and the Required Consenting Second Lien Noteholders, request that the Bankruptcy Court implement restrictions on trading of Claims and Equity Interests that might adversely affect the FCC Approval Process. The Debtors or Reorganized Debtors, as applicable, shall diligently prosecute the FCC Applications, including the Petition for Declaratory Ruling, that the Debtors or Reorganized Debtors file, and shall promptly provide such additional documents or information requested by the FCC in connection with its review of the foregoing."

[TC Talks]

Boy that's a lot of hope. I just wonder how Fields went from being a guy I generally respected as an operator to this. I hope all the acquisitions were worth it.

[MWmetalhead]

Yeah, no kidding. My gut feeling is the warrants being issued to the second lien lenders will never be worth anything. They will expire four years from BK emergence.

I hope Joel Hollander doesn't replace David Field. That would be a terrible error.

My top choice would be Dan Mason.

[TC Talks]

At this point you need someone who can figure out a way to monetize radio the way Newspapers have figured it out. That's not coming from someone who has the next great 11 songs in a row.

Engagement is poor with most stations.

[Colonel Flagg]

Yeah, no kidding. My gut feeling is the warrants being issued to the second lien lenders will never be worth anything. They will expire four years from BK emergence.

I hope Joel Hollander doesn't replace David Field. That would be a terrible error.

My top choice would be Dan Mason.

Agreed.

As someone who worked with both Infinity and CBS, I can honestly say, Joel Hollander was lousy. An empty suit.

[Radio Guy]

Dan Mason would be the White Knight

[tivoking]

Expect cuts on 97.1. They will probably go to national shows only on the weekends, except for NFL pregame.