Cumulus Radio Imposters, L.P.

We had another earthquake yesterday but it wasn't in Mexico or Indonesia.

It was in Atlanta -- home of the number two radio group in the world and by far the meanest when it comes to how they treat their employees.

I was having lunch with my Scottsdale Study Group radio friends yesterday when we all learned that Cumulus CEO Lew Tricky Dickey did it again.

Cumulus apparently cobbled together what looks like, feels like and sounds like yet another arm of its radio empire which is to be called Cumulus Radio Investors, LP with partner Crestview and unnamed co-conspirators who, we are told, together are investing up to $500 million in new equity.

But it turns out that Cumulus Radio Investors should more aptly be named Cumulus Radio Imposters -- in other words, someone who pretends to be someone else.

By now you have probably read trade accounts about the second coming of Lew Dickey and his Cumulus Empire. If you didn't know any better, you'd think that Cumulus has raised all this money to start buying stations and become an even bigger player in the industry.

My take is that this well orchestrated and under-funded foray back into the spotlight was timed perfectly and is not what it appears to be.

The Dickeys had just taken more bonuses -- an affront to all the slaves they have working for them at low wages or working for no wages thanks to mandatory overtime.

Then there is the cover story in Radio Ink -- a puff piece interview that makes Lew Dickey sound like he's, well -- Warren Buffett.

But if you're looking for my read on all of this and many of you had texted or emailed me yesterday asking for it -- my take is that there is nothing there.

It's "Tricky" being tricky again.

A slight of hand.

An illusion that could earn Lew Dicky an additional nickname -- "Slicky".

I'll outline the ways this latest Cumulus-Crestview Partners deal is an illusion, but first look at the premise upon which their company was formed (in their own words with mine to follow).

The partnership seeks to "invest in premium radio broadcasting companies that present attractive opportunities for significant long-term capital appreciation".


Nothing a Cumulus company has done (including the Susquehanna subsidiary) has ever returned significant long-term appreciation. And apparently the market thinks the same way I do as yesterday's announcement of this earth-shattering event only got them a 15 cent increase in their resulting $3.60 share price.

"The partnership’s objective is to deliver significant value and achieve attractive returns through Cumulus' proven skills in radio station management and operations, as well as its proprietary technology platform".


Now this sentence is the official definition of bullshit, I'm sorry.

Proven skills in radio station management and operations?

Surely they kid.

Shame on any investor who buys Cumulus stock based on this promise. In reality Cumulus is the joke of consolidation. Even Clear Channel, the recognized Evil Empire, acts competently sometimes but Cumulus has alienated its employees, some advertisers and listeners while the Dickeys get rich.

"Under the terms of the partnership, Crestview will lead an investor group that would invest up to $500 million in equity in the partnership, to be called Cumulus Radio Investors, L.P. (“CRI”)".


Red Flag.

Read that sentence carefully. Crestview is leading an investor group not investing $500 million of its $4 billion in investments. And keep in mind that Crestview helped fund the ill-fated Cumulus takeover of Susquehanna, a move that has led Cumulus deep into debt.

"Together with debt financing expected to be available through the capital markets, CRI could target acquisitions totaling in excess of $1 billion".

Lots of luck.

No one is selling.

Financing is not available except for unbelievably high interest rates.

This isn't a new business strategy. It's pure braggadocio.

Now, don't read the next quote on a full stomach, please.

"Cumulus would provide all management, financial, operational and corporate services to the partnership and its operations pursuant to a management services agreement. Cumulus will be compensated through management fees as well as incentive compensation based on investment returns".

Fees. Fees. Fees.

There's that word again. These Wall Street deals always pay off for the principles even if they stiff their shareholders because the partners make -- fees.

In reality, how can Cumulus manage more stations when it can't manage the ones it currently owns. Even if they reduced the acquisitions to a shell -- which I guess is their strategy, they do a piss poor job of it.

"Cumulus successfully formed a similar private partnership, Cumulus Media Partners LLC (“CMP”), in 2006 with three other leading private equity funds to acquire the radio broadcasting business of Susquehanna Pfaltzgraff Company in a transaction valued at approximately $1.2 billion".


That's not true.

They ruined a perfectly good -- no, an outstanding company in Susquehanna built by David Kennedy and they saddled themselves with so much debt doing so that Cumulus is now upside down.


In your dreams.

Now, here's the evidence I promised so that you, my readers, don't have to drink the Kool-Aid being dispensed by the Dickeys with help from the press:
  1. Crestview is an equity company and if they put up anywhere near $500 million out of their $4 billions of resources they will be risking a lot of their own money. That isn't going to happen. And notice how they are not announcing how much of their own money they are putting up.
  2. Cumulus is essentially a failed enterprise close to being in violation of its existing loan covenants and the only way out is bankruptcy, paying higher interest rates to refinance or trading debt for equity.
  3. If Cumulus plans to buy stations, lots of luck financing them -- at least at rates where you can handle the interest payments. There's no money available, duh! Sellers are upside down. That's why no one is buying. And owners don't want to sell now because values are low, duh (again). This is a sham.
  4. Most of the major players are broke meaning this Cumulus fantasy of a new company is just a hyperbole. The Dickeys are probably trying to take their losses and spread them over to new guys.
  5. Crestview in my opinion is so smart that they are getting into bed with a failed company.
  6. Equity holders borrow on their invested stake so what do you think they can borrow without even $500 million raised and no money available from lenders at reasonable rates -- again, a sham.
  7. Foreign investors are out so do the Dickeys have any more rich relatives to throw money into this pot?
  8. The economy is still broken. Banking and Wall Street haven't been fixed. Oversight is an issue. The radio industry lost the next generation. What kind of an investment company is this?
Cumulus Radio Imposters, L.P.

There is nothing there.

All smoke. Not even mirrors.

Cumulus is trying to smoke out desperate sellers so they can buy some properties on the cheap -- very cheap.

So that's the real deal on the Cumulus Crestview deal in my opinion.

Not what it appears or what the Dickeys would have you think it is -- a new company with lots of money to buy stations and make the Dickey Nation larger yet.

What it is is a thing that is not what it purported to be which is the dictionary definition of -- a sham.

Now, back to our previous programming already in progress -- a recession, a try at a recovery, tight money, high interest rates and no sellers.

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