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 thoughts on “Bankruptcy ≠ Major Sell-Off”

  1. 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.

    1. 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.

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