Audacy Inc., a prominent radio and podcast company, has announced its plans to file for Chapter 11 bankruptcy protection in order to reduce its debt. The Philadelphia-based company initiated the proceedings on January 7th in the Southern District of Texas after reaching a restructuring agreement with a majority of its debtholders. This agreement will enable Audacy to eliminate approximately $1.6 billion of its funded debt, resulting in an 80 percent reduction from its total debt of $1.9 billion. In exchange, the debtholders will receive equity in the reorganized company.
According to Audacy CEO David J. Field, the company has faced significant challenges in the traditional advertising market over the past four years, leading to a substantial decline in radio ad spending. These market factors have severely impacted Audacy’s financial condition, necessitating the need for a balance-sheet restructuring.
Audacy expects the bankruptcy court to hold a hearing in February to consider the approval of its plan. Once regulatory approval is obtained from the Federal Communications Commission, the company plans to emerge from bankruptcy. Throughout this process, Audacy assures its advertisers, vendors, partners, and employees that it will continue to operate normally without disruption.
Court documents reveal that Audacy accumulated most of its debt through the acquisition of CBS Radio stations, which ultimately forced the company to seek bankruptcy protection. Despite this setback, Audacy remains a dominant player in local news, sports radio, and music broadcast. It operates 225 stations in 45 U.S. markets and boasts over 150 million monthly downloads for its podcasts.
Founded in 1968, Audacy is one of the largest radio broadcasters in the United States. However, it is not the first major radio company to file for bankruptcy. iHeartMedia, the largest radio company in the country, previously filed for bankruptcy in 2018.
The surge in bankruptcies is not unique to Audacy. U.S. bankruptcy filings increased by 18 percent in 2023, reaching a total of 445,186 compared to 378,390 filings in 2022. Commercial Chapter 11 business reorganization filings experienced a significant rise of 72 percent, while consumer filings increased by 18 percent. Experts predict that the trend of seeking bankruptcy protection will continue in 2024 due to factors such as the conclusion of pandemic stimulus, higher interest rates, rising delinquency rates, and record levels of household debt.
The rise in loan interest rates for businesses and households can be attributed to the U.S. Federal Reserve’s efforts to control inflation through rate hikes. This has resulted in increased financial pressure on companies, as borrowing costs have doubled or even tripled compared to previous years. Collin Martin, a director and fixed-income strategist at Charles Schwab, explains that higher interest rates lead to additional interest payments, which can negatively impact corporate profits in an already challenging revenue environment.
In conclusion, Audacy’s decision to file for Chapter 11 bankruptcy protection is a strategic move to reduce its debt and restructure its balance sheet. Despite the challenges faced by the company and the broader increase in bankruptcy filings, Audacy remains committed to serving its audience and maintaining its position as a leading player in the radio and podcast industry.
