Steel City Media

Situation

In 2014, Steel City acquired the four Kansas City stations for over $100 million, funded by $60 million of bank debt, $20 million of mezzanine capital and the rest in cash/new equity. From 2014-2017, performance of the acquired stations softened materially, and, despite having paid the bank debt down by 33% (or $20 million), the Company found itself overleveraged in non-monetary default with its senior lender.

We were tasked with exploring, under various time constraints, a variety of alternatives including:

• a refinancing of Steel City’s senior credit facility, and/or
• development of an internal restructuring or recapitalization.

The Company filed for chapter 11 preemptively once it understood the hedge fund that held ITS subordinated debt was negotiating to purchase the defaulted bank debt and refused to provide a waiver from foreclosing on the Company’s stock.

Engagement

Steel City Media is a family-owned radio broadcasting company with 6 radio stations in Pittsburgh (2 FM stations) and Kansas City (4 FM stations). The Company currently maintains an approx. 25% share of the Kansas City market and 12% of the Pittsburgh market.

Outcome

Notwithstanding the Company’s debt profile and industry softness, and at a time when radio insolvencies resulted in equity being wiped out, Gordian was able to develop sufficient leverage, including with respect to valuation and feasibility under a non-consensual approach, to negotiate a consensual resolution pursuant to a POR that resulted in a home run for the Company and its shareholders, including:

• Old equity maintaining significant majority equity and governance control (with clawback rights and a call option on the remaining equity provided to lenders); and
• a restructured balance sheet that significantly reduced fixed debt service, extended out the maturity date of the Company’s debt and eliminated or otherwise favorably reset financial covenants – providing much needed operational runway.

Winner of 2019 M&A Advisor TECHNOLOGY DEAL OF THE YEAR ($50MM-$75MM).  Gordian in honored for this recognition.