Over the last 18 years, the entrepreneurial duo Lew Dickey Jr. and his younger brother John spent billions building the Atlanta company into the nation’s second-largest radio network through a string of 150 acquisitions.
But Cumulus, which has 454 stations in 90 markets, is struggling to keep its debt-fueled empire together in an age when broadcasters are slowly losing listeners and revenue to iPods and online music streaming services.
“Cumulus is suffering from the tail end effects of the era of consolidation. The chickens are coming home to roost,” said Michael Harrison, a former radio station owner and publisher of RadioInfo. The biggest problem in the industry, he said, is “smothering debt.”
Cumulus has sidelined its Atlanta founders and based its new CEO, Mary Berner, in New York. It lost $542 million last quarter. Its stock dropped about 90 percent in 2015, to well below $1 a share, amid rumors it will have to turn to bankruptcy court to restructure its $2.5 billion debt.
Under pressure from its largest shareholder, private equity firm Crestview Partners, Cumulus named Berner as the new CEO in September. She replaced longtime CEO Lew Dickey, who became vice chairman. John Dickey, meanwhile, lost his job as a Cumulus executive vice president.
A magazine industry veteran, Berner headed Reader’s Digest during its 2009 bankruptcy reorganization. Cumulus put Berner in charge of a “strategic review” of the company when she joined its board of directors in May.
One worry, she recently told investors, was falling ratings and nearly 50 percent employee turnover in 18 months. The company had about 6,000 employees at the end of 2014.
Cumulus did not make Berner or other employees available for interviews. In emailed responses to questions, a spokesman said Cumulus is generating enough cash from operations and planned asset sales to avoid bankruptcy.
“Despite what the stock price might indicate, (Cumulus) has and will continue to generate a significant amount of cash from operations,” a spokesman for Cumulus said in an email. The company, which had $84 million in cash on Sept. 30, also expects to collect about $200 million by 2017 from the sale of real estate.
“We have no plans to file for bankruptcy and the next maturity for debt is not for three more years until May of 2019, so we have significant runway to begin to stabilize and ultimately grow the business,” the Cumulus spokesman said.
On Dec. 31, Cumulus said it bought back almost $65 milllion of its debt at a discount, allowing it to save about $2.8 million a year on interest payments.
The spokesman disputed news reports that Cumulus is moving its headquarters from Atlanta to New York.