Susquehanna Radio

Susquehanna Radio  [No web site]  operates about 27 (8 AM /19 FM) radio stations, most located in major radio markets.  The company was acquired by several private equity firms and organized under the name of Cumulus Media Partners and put into a subsidiary called CMP Susquehanna Radio Holdings.  Cumulus radio was a 25% participant in the ownership, and has a contract to the operate the stations on behalf of CMP.    The company has about 500 full time employees.  CMP also owns several other stations (KLIF-AM is one) that are not held in the Susquehanna subsidiary.

History

Susquehanna’s name comes from the Indian tribe and river that runs through Central Pennsylvania.  The company began in York, Pennsylvania and was where it was headquartered until the company was bought in 2005.   The company has an interesting heritage – it was created by the family that owned Pfaltzgraff pottery company, which has made china and other related pottery since the 1830s.  In the 1940s and 50s their goods were widely available in Woolworth’s and Montgomery Wards.

In 1942,  the Appell family decided to diversify into the radio business.  The company owned WSBA-AM in York and WARM-AM in  Wilkes-Barre/Scranton.   When cheap foreign imports started to take away market share  in the pottery and ceramincs  business, the radio business became bigger than the pottery business.   During the 1960s, the company’s stations prospered, achieving 40% shares – and the pottery business began to grow again by changing their product line and marketing strategy.   The company acquired additional radio stations, and by the 1990s was operating 17 stations.  

The company also got into the cable TV business.  Susquehanna Media was formed in 1993 to hold the radio and Cable TV interests in order to sell debt to fund its acquisitions.   At the time, they owned 23 stations.   The company partnered with Adelphia Cable to offer local phone service and internet access after the 1996 Telecom Deregulation Act was enacted.

 By 2002, the company had loaded up on over $500 million in debt, very typical of big radio at that time. 

In 2005, the Susquehanna Radio subsidiary was sold to the newly created Cumulus Media Partners for approximately $1.2 billion ($466 million of acquired credit facility debt, $250 million in long term 9 7/8% notes, buyout of minority owners, ESOPs,  plus stock).    At the same time, the Appell family also  sold their Cable TV business to Comcast.  Mr Appell was then 81 years old and no member of the Appell family was interested in taking on the responsibility of running the businesses, so he decided to sell the companies.

CMP was created by Bain Capital, Blackstone Group, and Thomas H Lee Partners – the same three companies that together own the parent company of Dunkin Donuts. The original intent was that CMP would become the holding company for Cumulus Radio after it ‘went private’, but that effort was abandoned in 2007 – leaving CMP owning only the Susquehanna stations and a few former Cumulus stations they donated for their 25% equity.

CMP failed to meet the terms of its credit facility and in March 2009 an offer was made to restructure the finances of the company.  In March 2009, the company completed a debt for equity swap for most of its long term notes, giving control of the future of company to its bondholders (in theory).   CMP also replaced their CPA auditing firm at the same time.   

Not a lot of news since then.  Because all of the stations (other than the ones in the York area) are in large markets, if the company is liquidated at some point, those stations will be hard to sell because most of the entities with money to buy radio stations already have maxed out their FCC per-market ownership limits.

Major Stations – top 25 markets

San Francisco, CA

KNBR-AM  (Sports)
KTCT-AM   (Sports)
KFOG-FM  (Classic Rock)
KFFG-FM  (KFOG Simulcast)
KSAN-FM  (Alernative Rock)

Dallas / Fort Worth TX

KTCK-AM  (Sports)
KDBN-FM (Rock)
KLIF-AM (CMP, but not former Susquehanna)
KKLF-AM (Richardson – KLIF Simulcast)
KIKT-FM (Greenville)
KGVL-AM (Greenville)
KTDK-FM (Sanger)

Houston TX

KRBE-FM

Atlanta, GA

WNNX-FM
WWWQ-FM

Cincinnati, OH

WRRM-FM
WGRR-FM
WFTK-FM

Ownership

All of the stock (equity) interest is privately held.  25% of the stock (and 50% of the votes are controlled by Cumulus Media.  The former bondholders have preferred stock, which is ahead of the Cumulus interests, but behind the bank credit facility, which is still owed about $800 million.  The remaining bond holdings are holding onto a piece of paper and a dream.

Management

The CMP stations are operated by Cumulus Media (Mr Dickey and his family) in exchange for a percentage of the station’s free cash flow.

Financial Condition

Up until May 2009, CMP Susquehanna Radio Holdings still filed SEC reports as they had publicly traded debt instruments, even though the company itself  was privately held.   Since it is a 2nd level subsidiary, looking at its finances in isolation may be misleading.   Following the conversion of the debt to non-tradeable stock and warrants, they are no longer required to file SEC reports – so unless they go public in the future or offer tradeable debt, this is the end of visibility to their finances.

Key Balance Sheet Items: (2008)

Total Assets:  $665 Million

  • Value of Radio Station licenses:  $411 million
  • Goodwill and other intangible Assets:  $79 Million
  • Cash:  $83 Million
    (company increased short term borrowing by $108 million in 2008)
  • Accounts Receivable: $38 Million  (69 days of revenue)
  • Land, Buildings, Equipment (net) $31 Million

Debt:

  • Current Liabilities:  $23 million
  • Long Term Debt:  $941 Million

Stockholder Equity:  $-430 Million

Credit Facility

The company has a $797M credit facility from a group of banks ($700 million is term, $97 is revolving).   $797  million is currently borrowed against the facility.  (as of December 31, 2008).   The remainder of the long term debt is mostly notes that were swapped for equity in March 2009.  The remaining bonds are completely unsecured, and stand in line behind the bank credit facility.

Swap transactions

In 2008, the company acquired a $200 million interest rate swap to protect a portion of their LIBOR based credit facility from increases in future interest rates.

10-k Notes

Profitability

All numbers in $million 2008 2007 2006 2005 2004
Radio Revenue 203 223 222 231 231
License Impairment 670 188
Operating Income
(Without Impairment)
-45 -77 40 45 65
Long Term Debt Balance 941 910 931 225  
Debt Service Cost 65 78 80 17 19

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