Great Article by Gene Ely of Forbes
The deal was struck in just the nick of time, hours before the radio giant was set to be shut down by its creditors, and it could well save iHeartMedia, allowing it to be reborn and thrive again.
But be assured, the iHeartMedia that emerges from the prearranged bankruptcy worked out last week with creditors will be a very different company—and a lot leaner.
Expect to see a dramatic shedding of radio stations, likely hundreds, many at rock-bottom prices.
Never mind statements put out by the company that stations will not be sold off. That’s intended to quell fears among employees and stem any flood of talent.
A station selloff is all but assured for a variety of reasons.
—It’s the smart thing.
The very purpose of bankruptcy is to give companies breathing room to sort out which parts of their businesses work and to shed those that don’t, free from pressure from creditors.
iHeart has 850 stations, and some number of them are under-performing—losing money, in plain English—or they’re simply in markets where the company sees no future.
It just makes sense for the company to dump those stations and focus on its most profitable stations and markets where it sees growth potential.
You can bet shedding under-performing stations will be a top priority of the major debt-holders, led by Franklin Advisers, as they assume control of the company under the restructuring.
How many stations are under-performing? Only iHeart’s corporate chiefs know for sure, but assume it’s quite a few. The company was notorious for slashing costs and running on the cheap. That comes with a steep price over time.
In better times and different circumstances, one could make an argument for investing in efforts to turn around ailing stations.
Not in these times. Valuations for radio stations—what they fetch when put up for sale—have been tumbling in recent years, and they could well be headed for a nose dive.