Bankruptcy ≠ Major Sell-Off

Corporate cry-baby

Cor­po­rate radio only wants to get big­ger

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

{ 2 comments… add one }
  • Scott

    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.

    • Kevin McKinney

      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.