Radio Owner – CMP Susquehanna

You’re 81 years old.   Your family has been making china and other ceramics in York, Pennsylvania  since the 1830s.   Back during World War Two, your family owned two local AM radio stations – after the war, life was good and your radio stations prospered.   Your Susquehanna Radio company was very profitable and over time acquired a number of major market radio stations, mostly in San Francisco and Dallas/Fort Worth.

In the 1980s, the family went into the Cable TV business as well.    After the 1996 Telecom Deregulation Act set everyone free, your Cable TV company hooked up with a wildly successful company called Adelphia in nearby (125 miles) Coudersport, PA to offer local telephone service and internet access.  Time to load up on debt and acquire more stations.    Then the bubble burst in September 2000.

Adelphia collapsed overnight and it became apparent the Rigas family that owned Adelphia was hiding a lot of secrets “off the books” about their financing and operations.   Along with Enron and Worldcom, the outrage in the country resulted in the passage of Sarbaine Oxley, which establishes civil and criminal penalties if the company management knowingly misrepresents the financial reports.   While Susquehanna was privately owned, it did have publicly traded debt – a lot of it… secured mostly by radio station licenses.  There were rumblings in the accounting industry about requiring companies to write down the values of overpriced intangible assets acquired through purchases or mergers.

You watch your business partner John Rigas convicted of Securities fraud  in 2004 and probably headed to jail.  None of your children are able or want to take over the family business.  It looks like the right time to retire.

Comcast already owned 30% of the Cable TV business (which they acquired from Adelphia’s bankruptcy).   The pottery business was sold off, and the Radio business was essentially sold to the Dickey family of Atlanta Georgia, who own Cumulus – but structured and financed in a way inside a new entity called Cumlus Media Partners that might not cause problems with FCC ownership limits.  The Dickey family would run the stations, be paid 5% of the EBIDTA of the stations per year, but not technically “control” the new company.

Cumulus had plans to take the entire Dickey media empire private, but that fell apart in 2007 – leaving Susquehanna left out in a shell corporation by itself, more or less.   In 2009, the bond holders were forced to turn in their CMP bonds in exchange for preferred stock and warrants (probably of very little value).  CMP Susquehanna hasn’t turned out so well.    The company is now controlled by the same three entities that own Dunkin’  Donuts – Bain Capital, Thomas H Lee (both also control Clear Channel and lots of other things) and BlackRock, believed to be the world’s largest money management firm as of 2009.

So CMP Susquehanna sits in limbo caught between its history and an uncertain future.  Since being “taken over” by Cumulus, the past two years the company has lost money, even before its debt service.   Its maxed out all of its available credit.   Things don’t look very good.  Paging Tim Geithner…

The company profile can be read [here]