IHeart Expected Restructuring Doesn't Detract From Radio's Health, Officials Say

Beyond the more high-profile, investor-focused iHeart and No. 2 Cumulus, most large radio groups are essentially large family-owned businesses focused on local content, said Bayard Walters, CEO of broadcaster The Cromwell Group. “They were the poster child of difficulty in the industry,” Walters said of the two biggest radio organizations. Other radio groups don't cater to investors or have a national focus in the manner of iHeart and Cumulus, said Fletcher Heald broadcast attorney Frank Jazzo. "Every market is different," said Alpha Media CEO Bob Proffitt.

IHeart announced last week it won’t make a $106 million interest payment and that its board is “considering options as part of its strategy to achieve a comprehensive restructuring of the Company’s debt.” Cumulus entered bankruptcy proceedings last year (see 1711300059).

The radio business has long seen both restructurings coming, said Justin Nielson, senior researcher for S&P Global Market Intelligence. They are seen as leading to a point where the two biggest companies in radio won’t be encumbered with crippling debt, broadcasters said. That burden is considered a deterrent to investment in radio, industry officials said, though they conceded the bankruptcies aren't attractive. “The industry has recognized for awhile that this was going to have to be dealt with in some fashion at some point,” said broker Bob Heymann from the Chicago office of Media Services Group. ”When viewed from a macro position, it is never a good thing when the industry’s leader is facing a potential bankruptcy action.” Many in radio would just like to see “the Band-Aid ripped off,” said Patrick Communications broker Gregory Guy.

Many industry officials contrasted iHeart and Cumulus with Entercom and its recent purchase of CBS Radio (see 1711270016). Entercom’s growth is an indication of a positive direction for the industry, said Proffitt. Though conceding radio faces “headwinds,” he’s “optimistic.” Ratings numbers show radio leading other media industries, and Entercom is the kind of company that will help “all ships to rise,” Proffitt said. He believes iHeart and Cumulus will remain in the industry after the reorganizations, with less pressure from their size and debt obligations. Where other industries are volatile and rise and fall, radio remains stable, Proffitt said. Beasley’s recent buy of Greater Media is a similar good sign, Walters said: “I think the business is strong.” Entercom didn’t comment.

Though every industry official interviewed cited Entercom/CBS Radio as a positive sign for the industry, some questioned a proposed deal by Emmis to sell its four St. Louis stations to competitors Entercom and Hubbard. Those stations were strong, and ideally, there should have been other buyers seeking those stations, Guy said. Other aggressive buyers would indicate a more healthy industry, Guy said. Other industry officials didn’t agree. “I do not see the Emmis St. Louis deal as anything other than a strategic action taken by one specific company,” Media Services' Heymann said. Emmis didn’t comment.