Bankruptcy ≠ Major Sell-Off
I think Forbes magazine is wrong. An opinion piece by wrongly predicts that bankrupt corporate radio is heading for a big sell-off. I WISH he was right.
Bankruptcies for corporations are legally different than for individuals. For you or me, in bankruptcy we either lose everything or receive a payment plan. For corporations, however, they can renegotiate the terms of contracts with unions and creditors. In some ways, it’s a win for them. “[Corporate] bankruptcy is effectively a financial incubator… the same way you keep the baby in the incubator until he’s ready to breathe on his own” says Boyce Watkins, professor of finance at Syracuse University. This is why they call it “bankruptcy protection”.
The problem I have with this, is that the government is protecting a company that screwed its employees, created an inferior product, and then tried to blame its failure on not being allowed to consolidate more. The court should be liquidating corporate radio into bite-sized chunks for young local entrepreneurs to revitalize. These bankruptcies reveal that consolidated radio is unviable and fiscally irresponsible. Huge companies with few local employees are by nature, out of touch with local listeners.
The CEOs of bankrupt radio are going to do everything they can to keep as many stations as possible. Creditors, however, would be wise to push for a sell-off. That move would create real cash and get them out of an industry that has lied to them (and us) about their viability since rampant consolidation began.
Kevin McKinney
If the creditors want to get paid, they will settle for nothing less than a selling of assets. I’ve tried explaining to some of my radio contemporaries that just because they file bankruptcy does not mean anything will change. In fact, if the creditors roll over (again) and accept equity instead of cash, nothing will change.
Scott, thanks for your comments. Yeah I’m afraid the Bob Pitman’s of the world are good at talking up the assets even though he depleted them.