Cumulus Eyes CBS

Cumulus and Lew Dickey sure have a way of making people think that their eyes are bigger than their stomach.

Perhaps you’ve seen the speculation reported by Tom Taylor in Radio-Info recently that Cumulus – through the mirage of its Crestview partneship – is lurking in the distance ready to take several CBS Radio markets off the hands of CBS CEO Les Moonves.

The thinking is Moonves wants to sell clusters in smaller CBS markets and concentrate on the large. Before the recession iced everything, CBS sold off properties in Kansas City, Columbus and Denver.

San Diego, Phoenix, Orlando, Cleveland and Riverside-San Bernardino look like good markets to dump now – if you buy into the current speculation.

And there is a sucker saying he is willing to pay 7 times cash flow for the right properties.

If all of that is true, you will be congratulating that sucker -- Lew Dickey -- on picking up some CBS leftovers soon.

But with a purchase price of 7 times cash flow, most people familiar with these types of deals will tell you – Dickey is spending your money not his.

Why buy when he cannot afford what he currently owns?

Even Larry Wilson didn’t pay those multiples when he picked up four stations from CBS to pair with the two he bought from Paul Allen in Portland.

And you could be forgiven if for a moment you think Lew Dickey will actually overspend by four times to pick up most or all of the CBS markets Moonves wants to move.

On the other hand, Lew Dickey is "The Great Pretender" and he hits on radio companies the way frat brothers hit on women.



Except when it comes to acquiring radio stations, Lew Dickey does take no for an answer.

Usually, this kind of talk is all about his ego.

Many present and former Cumulus employees who correspond with me have a story or two about how Lew brags about how he is going to buy Citadel out of bankruptcy and Regent before the company collapses under its debt.

But Citadel is ready to emerge without the help of Dickey and Regent is back in business under the ownership of its debt holders who traded debt for equity.

And where is a company on the ropes like Cumulus going to get the money to overpay for these CBS leftovers?

That’s the genius.

Cumulus is back in the game again with Crestview Partners, the investment bankers who helped them overpay for Susquehanna and wound up saddled with the resulting debt. This new iteration is called Cumulus Radio Investors.

From the day it was announced, Cumulus Media said it would not put any of its money into the new acquisition fund (hello?) and neither would Crestview – yet.

However, your money is welcome.

Who knows, Dickey could actually pull it off.

Buy more stations; get more debt and walk away bigger.

There is something in me, however, that wouldn’t be surprised if Cumulus Radio Investors overpaid to acquire, say, some or all of the available CBS markets and then just happened to turn around and use the rest of the money they would raise under the guise of growing bigger markets to re-fi their own debt.

Look, believe all the happy talk you want about the recession being over for these players but their recovery is a long way off if not out of reach.

For example: Clear Channel is facing some $18 billion in debt payments it must make in a few years. That’s $18 billion with a “b” and the money has to come from somewhere – unless, of course, by the time they run up against their loan covenant they can magically ---

--- refinance again at prevailing rates.

That’s the game these guys like to play. You can’t hit a moving target.

And Cumulus, always an admirer of Clear Channel, could take a page from the same playbook.

That is, buy some stations.

Make some headlines.

Get the focus off of their own debt covenants that they are staring in the face.

And, refinance Cumulus in time to live another day.

This may seem odious to you if you actually care about local radio. The idea of borrowing from Goldman to pay J.P. Morgan Chase – so to speak – is simply creating more debt and refinancing it.


That’s why my readers are so smart.

That is exactly the game. Big media groups are just like other companies in this economy. They live to get big, buy debt and refinance it.

Unlike my old Italian father who thought wealth meant paying down your debt, radio’s new class of carpetbaggers would never want to do that.

So, 90’s.

And that’s why it doesn’t really matter if Cumulus actually closes the mythical CBS deals or not. Because the end game is to live another day – get bigger on borrowed money until they can’t do it any more.

And then?

There’s always bankruptcy again.

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