Cumulus Gets Support From Lenders

In a Monday court filing, Cumulus’ Term Loan Lenders voiced support for the company’s restructuring plan while blasting a committee of noteholders and the ad hoc cross-holder committee for objecting to the plan. The Term Loan Lenders say, “Cumulus is finally on the cusp of de-levering their enterprise by more than $1 billion and creating a trajectory for long-term success,” with a plan that “delivers real economic value to out-of-the-money unsecured creditors.”

   (Committee objects to restructuring plan)

The court filing states that following years of intense negotiations with the Term Loan Lenders and noteholders (who populate both the Committee and the Ad Hoc Cross-Holder Committee), a litigated and failed exchange offer, and a massive and ongoing operational turnaround effort—all while enduring constant buffeting by severe industry headwinds and existential threats by competitors—Cumulus is finally on the cusp of de-levering their enterprise by more than $1 billion and creating a trajectory for long-term success. These hard-fought restructuring negotiations have produced a plan that is by no means a zero-sum result, but rather delivers real economic value to out-of-the-money unsecured creditors. Standing in the way of this negotiated and reasonable compromise are the Committee and the Ad Hoc Cross-Holder Committee, who seek far more than they are entitled to under the Bankruptcy Code. The Term Lender Group supports the $1.5 to $1.7 billion valuation proffered by the Debtors, and this reasonable valuation range more than supports the value being provided to unsecured creditors under the Plan.

The Term Loan Lenders are owed approximately $1.73 billion, plus interest and fees. For months prior to filing for bankruptcy Cumulus, the Term Lender Group, and the Ad Hoc Noteholder Group negotiated over the terms of a proposed restructuring. The parties exchanged multiple proposals and term sheets, and Cumulus worked with both the Term Loan Lenders and the Ad Hoc Noteholder Group to try to reach a deal. After those negotiations, the Term Lender Group agreed to the Plan, and agreed to take a $430 million haircut on their fullysecured term loans, but nonetheless provides for a 16.5% equity distribution to unsecured creditors. The Term Lender Group says it agreed to this compromise on the equity split to earn the support of the Cumulus, who was driving an extremely hard bargain, and to ensure the confirmability of the plan.

The Term Loan Lenders go on to say that the 16.5% equity distribution to unsecured creditors is far more than the unsecured creditors are entitled to based on any reasonable and mainstream valuation of Cumulus’ business. “As the Court recognized at the first day hearing in these chapter 11 cases, the Court’s view on valuation of the Debtors will determine whether this Plan is confirmable. The Term Lender Group states it supports Cumulus’ valuation experts, and does so because Cumulus’ experts rely on recognized and mainstream valuation methodologies. “The experts proffered by the committee do no such thing. The committee’s experts assert that there is an “intrinsic value” waiting to be uncovered that no one, not the market, not the Term Lender Group, and not even the objecting parties, really believe exists.”

The Term Lendor Group states that throughout the entire negotiating process, junior creditors have shown no interest in purchasing the company or refinancing the Term Loan Lenders’ debt, either in part or in whole, which under the Objecting Parties’ valuation theory should be paid at par plus accrued interest. “The Objecting Parties’ real-world behavior undercuts the seriousness of their position on valuation and belies their true motives—to hold up confirmation of this Plan to extract greater (and undeserved) value from the Term Loan Lenders.”

And finally, the Term Lendors state that Cumulus is embarking on a difficult operational turnaround in a severely declining industry. “Only Cumulus’ plan places their value in a reasonable range and provides the de-levering and runway necessary for Cumulus to execute their turnaround and implement their strategic initiatives. The Plan should be confirmed.”