Cumulus Media agreed to sell nearly all of its towers in a bid to increase its liquidity and help pay down debt. The broadcast company told the SEC the buyer is Vertical Bridge REIT, LLC and VB Nimbus, LLC, each an affiliate of Vertical Bridge Holdings, LLC, for the sale of “substantially all” of its tower sites “and certain other related assets.” Cumulus pegged the value of the deal at approximately $213 million.
In the deal signed last Friday, and announced yesterday, Cumulus said the transaction may occur in one or more closings. At each closing, Cumulus would sign lease agreements for the continued use of the towers. The broadcaster would also sign lease agreements “for certain other assets being sold, including excess land and certain intangible rights,” it told the SEC.
Vertical Bridge is required to acquire at least 85 percent of the tower sites. The broadcaster is not required to consummate the transaction unless the buyer agrees to acquire at least 92.5 percent of the tower sites (based on value) at the first closing.
The initial term of each lease would be 10 years, followed by five option periods of five five years each. If Vertical Bridge acquires all of the tower sites that are subject to the transaction, the broadcaster will have annual lease payment obligations of approximately $13.5 million. That figure would be subject to customary escalators, which would be accounted for as a reduction of the financial lease liability and interest expense, a loss of annual tenant revenues of approximately $2.3 million and an approximate $2.3 million annual operating expense reduction of which approximately $1.5 million is non-cash intangible amortization.
Cumulus will also record non-cash imputed rental income for certain tower sites where it will continue to use a portion of the tower along with other existing and future tenants. The first closing is anticipated in Q4 2020 following a 45-day diligence period in which the buyer and the seller may exclude certain sites from the transaction.
Cumulus on Monday reported that for the three months ended June 30, its revenue fell almost 48 percent from the same period in 2019, and reported a net loss for the 2020 quarter of $36 million. The company owns and operates 424 radio stations across 87 markets. Cumulus completed a bankruptcy reorganization in 2018.
“Despite the COVID-19 pandemic’s material impact on revenue, the company generated over $90 million of cash in the quarter through quick and decisive expense actions, strong working capital management and the completion of the sale of land in Bethesda, MD, stated Cumulus Media President/CEO Mary Berner. She’s referring to the former WMAL-AM tower site. The broadcaster closed on the sale of a 75-acre tract to home builder Toll Brothers in June that generated gross proceeds of $74.1 million, Inside Towers reported.
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