In a filing with the bankruptcy court Monday, Randy Michaels’ Merlin Media stated it was in the process of working with Cumulus to resolve all business and legal issues between Merlin and Cumulus, including the possibility of Michaels taking WLUP-FM and WKQX-FM back or selling them to someone else.
In a January 18 court filing Cumulus stated, “The Merlin agreements are economically detrimental to the debtors’ estates and operating the Merlin stations, net of the LMA fee, has proved unprofitable for the debtors since the LMA’s execution.” Cumulus has asked the court to nullify the agreements. The Merlin filing on Monday appears as if Merlin is letting the court know that an agreement between Merlin and Cumulus could be made before the upcoming court date to approve the reorganization plan which would include the rejection of the Merlin agreements.
According to Cumulus, the stations have lost $8.4 million since 2014. Cumulus says the two stations, net of LMA fees to Michaels, lost $1.5 million in 2014, $800,000 in 2015, $1.1 million in 2016, and $5.1 million in 2017. The LMA fee Cumulus was paying to Merlin was $600,000 per month.
Cumulus was paying Merlin the monthly LMA fee and had a Put and Call Agreement which meant Cumulus was obligated to purchase the stations for approximately $50 million (the “Put Price”) if Merlin exercised the Put agreement, which it did on October 6, 2017. Cumulus is looking to reject both the LMA agreement, stating it is unprofitable, and the Put price of $50 million, stating $50 million exceeds the market value of the stations.
The filing also states the Merlin also objects to Cumulus’ claim that the Merlin deal should be classified as a subordinated claim. A subordinated or junior claim would only be paid after senior claims are paid. Merlin plans to object to the Cumulus reorganization plan on this basis.
