Radio and podcast giant Audacy Inc. said Sunday it filed plans for Chapter 11 bankruptcy protection to reduce its debt.
The Philadelphia-based company began the proceedings in U.S. Bankruptcy Court on Jan. 7 for the Southern District of Texas following a restructuring agreement with a majority of its debtholders.
The agreement will allow Audacy to eliminate about $1.6 billion of funded debt from approximately $1.9 billion, or an 80 percent reduction. Audacy’s debtholders will receive equity in the reorganized company.
“The perfect storm of sustained macroeconomic challenges over the past four years facing the traditional advertising market has led to a sharp reduction of several billion dollars in cumulative radio ad spending,” Audacy CEO David J. Field said in a statement.
“These market factors have severely impacted our financial condition and necessitated our balance-sheet restructuring.”
Audacy said it expects the bankruptcy court to hold a hearing to consider the approval of the plan in February, and plans to emerge from bankruptcy once obtaining regulatory approval from the Federal Communications Commission.
The company, which was delisted from the New York Stock Exchange in November 2023, said it expects to operate normally through the process without disruption to its advertisers, vendors, partners, or employees.
According to court documents, Audacy picked up most of its debt from its acquisition of CBS Radio stations, which forced the company to seek bankruptcy protection.
Chapter 11 bankruptcy filings are made by companies to restructure debt and allow the businesses to retain assets while drafting a plan to pay back what they owe.
Audacy is a dominant player in local news, sports radio, and music broadcast, operating 225 stations in 45 U.S. markets, and its podcasts have more than 150 million monthly downloads, according to court documents.
Founded in 1968, Audacy operates in hundreds of broadcast, sports, and podcast shows and is the second-largest radio broadcaster in the country.
Surge in Bankruptcies
U.S. bankruptcy filings rose by 18 percent, to 445,186 in 2023, up from 378,390 filings in 2022, according to data from Epiq AACER, a provider of U.S. bankruptcy filing data. This includes both commercial and personal bankruptcy filings until the month of November.Commercial Chapter 11 business reorganization filings shot up by 72 percent, to 6,569 from 3,819 the year before, the report said. Consumer filings rose 18 percent, to 419,55 from 356,911 in 2022.
“We expect the increase in number of consumer and commercial filers seeking bankruptcy protection to continue in 2024 given the runoff of pandemic stimulus, increased cost of funds, higher interest rates, rising delinquency rates, and near historic levels of household debt,” said Michael Hunter, vice president of Epiq AACER.
Loan interest rates for businesses and households have risen over the past two years due to the U.S. Federal Reserve’s rate hikes to contain inflation.
In an interview with Business Insider in late November, Collin Martin, Charles Schwab director and fixed-income strategist, estimated that borrowing costs for some businesses doubled or even almost tripled last year compared to the previous years. This has put financial pressure on firms.
“When corporations are managing their balance sheets and looking to issue or refinance debt, they have to issue debt with significantly higher yields than what they’ve seen over the past number of years, and that’s just a big hit to their earnings. It’s more interest they have to pay, which can affect their corporate profits in an environment where revenues are already slower,” he said.
