One of the FCC’s “rules” about licenses is they heavily frown on a station owner using the station license as collateral to borrow money. They won’t normally transfer a license to a new owner if the sale documents mention the license as collateral for a loan, either from the seller or a third party. The main reason is they don’t want the license and the operation of the station to go into limbo because someone failed to make their loan payment. Bankers generally don’t know much about running radio stations.
Looking at how Textron become a radio station owner is interesting case study. Textron’s main business is they make things for the military – like Bell helicopters, Cessna airplanes and golf carts – but they also owned 11 radio stations. You figure this out only if you look deeply into the FCC records or are really “inside the industry”.
Textron has a commercial lending subsidiary called Textron Financial – it is similar to what GMAC does for GM. The financing arm can provide money to buyers of the company’s main products.
In 2001, Textron Financial provided $25 million to a company called Westburg Media Capital , for the purpose of re-loaning to folks in the media ownership business. Westburg loaned money to a radio station company called Petracom of Joplin LLC – but Petracom filed for bankruptcy in January of 2004. The licenses were transferred to FFD holdings a year later to resolve the bankruptcy . FFD Holdings was just a legal entity to “temporarily” hold the licenses and operate the stations on behalf of Textron Financial and to get the FCC signoff on the license transfer.
Textron (via FFD) was the owner from January 2005 until February 17, 2009. Textron is unwinding its investments currently to reduce its exposure in commercial lending and sold the stations to another entity American Media Investments for around $5 million. The original announcement in December 2008 said 7 stations were being sold, but all 11 stations in the FFD corporation were transferred to the new owner.
Now just imagine if a highly leveraged radio company failed, and 100s of radio stations reverted to being owned by a consortium of banks, who themselves are on the verge of failure or government takeover. Imagine the mess that would create if it happens.