Engagement Results

Client:

Newspaper and Radio Station Owner/Operator

Industry:

Newspaper and Radio

Size:

$14 million

Expertise:

Financial Assessment

Assignment:

The bank had given the Company a loan to build a new facility and the Company had been in forbearance of the loan for the year. The Company is a fifth generation, family owned operator of two local newspapers and five radio stations located in the Midwest. Each newspaper and radio station operated independently and minimal synergies were occurring. The Company did not react quickly to the economy crash in 2008 and it had some large contingencies, including but not limited to the Company’s unfunded pension fund liability and long-term service contracts. The radio stations were not managed well and when the station’s largest format was killed by Arbitron, insufficient research was done to determine the next format. This station alone saw revenues decrease by over 70% and they were bleeding through cash to keep the business afloat.

MainStream was engaged by the bank to:

  • Perform a budget review for the past three years
  • Create a current business plan and build a financial model for fiscal 2011
  • Perform a 13-week cash flow
  • Evaluate size scope and competency of management infrastructure
  • Perform an operational review
  • Provide the bank with recommendations on whether to accept the Company’s settlement of approximately $3.3 million or other options to recoup their loan of $10.8 million.

Actions:

MainStream prepared a 13-week cash flow for the consolidated company, noting no issue in the short term of the Company being able to make payments. In addition, MainStream analyzed the previous three years of history along with the Company’s forecast and built a financial model. MainStream conducted a detailed assessment of the markets, services, significant contracts, operations of the Company. From this assessment, a financial model forecasting performance was developed and various options were considered. The options included:

  • Accepting the current offer
  • Selling debt to third party lenders
  • A partial sale of the Company
  • Loan work-out scenarios

Working with the bank and the Company’s management, MainStream reviewed the options and provided recommendations.

Results:

MainStream presented a review to both the bank and the Company’s management. Subsequent to our meeting, the pension plan was frozen and certain businesses were put up for sale to pay off part of the loan and stop the bleeding. The bank did not settle for the Company’s original loan offer of $3.3 million and the Company established a plan to sell part of the business and work-out the loan.