What’s Next? Restructuring under Chapter 11

The company that puts Northern Colorado businesses’ ads on benches, buses and billboards is working to reorganize after filing for Chapter 11 bankruptcy protection.

Greenwood Village-based NextMedia Group Inc. reached a deal with its principal lenders in December to restructure the company’s debt. NextMedia and its subsidiaries filed for bankruptcy on Dec. 21 with the U.S. Bankruptcy Court in Delaware. At the time of filing, the company estimated assets of $0 to $50,000 and liabilities of $100 million to $500 million. The liabilities are largely from two liens totaling $251.8 million.

The assets reported by the holding company do not include its subsidiary assets. NextMedia Northern Colorado, for example, reported assets of $10 million to $50 million. In addition to its Northern Colorado operations, NextMedia has outdoor advertising markets in California, Wyoming, Nebraska, Kansas, Wisconsin, Virginia, North Carolina and South Carolina. It also owns 36 AM and FM radio stations in seven mid-sized and suburban markets.

NextMedia said in a statement at the time of filing that the bankruptcy would have no impact on day-to-day operations, including no changes to management or employee reductions.

“As a result of this reorganization, we will bolster our financial position considerably, enhancing our ability to invest in our operations and execute our strategy,´ said Steve Dinetz, president and CEO, in the statement. “Over the past 18 months we have taken steps to reduce costs and increase efficiencies across our operations, while continuing to invest in our assets, content, sales, marketing and customer service. Today’s action puts us well ahead of the process in preparing NextMedia to fully capitalize on the recovery in the nation’s out-of-home advertising markets.”

In December, NextMedia predicted that its earnings before tax, interest, depreciation and amortization would be $23 million for 2009. The company’s debt is expected to be reduced to $128 million after reorganization.

The company referred all further inquires to its bankruptcy filings and public statement.

Growth by acquisition

NextMedia entered the Northern Colorado market in 2002 when it acquired assets of Flack Outdoor Advertising Inc. The $24.9 million deal included more than 1,600 billboards mostly in Northern Colorado but also in Wyoming and Missouri. In 2004, the company bulked up its local holdings through a swap in which it exchanged its New Jersey billboards for displays in Connecticut, Northern Colorado and Wyoming.

NextMedia again expanded in 2007 when it purchased the Northern Colorado markets of Fort Collins-based Outdoor Promotions. Outdoor Promotions handled the bus, bench and shelter advertising for Fort Collins, Loveland and Longmont at the time, but decided to focus more resources on the booming Las Vegas market.

As of Dec. 31, a majority of NextMedia’s stock was owned by various private equity groups with directors on the company’s board:

• James McElwee of Weston Presidio Capital held 17 percent of the company’s stock;
• Brian McNeill with Alta Communications held 11 percent;
• Kenneth Pontarelli with Goldman Sachs held 20 percent; and
• Adam Stulberger with Tailwind Management LP held 36 percent.

NextMedia filed its reorganization plan on Jan. 5 with an amended plan filed on Feb. 12. Under the plan, the company will convert a chunk of its debt into equity. The lead investors in the second lien, worth more than $89 million, will get an initial allocation of 95 percent of the new NextMedia common stock in exchange for satisfaction of the lien agreement and a $20 million cash infusion.

The lead investors – Angelo, Gordon & Co. and Strategic Value Partners LLC – focus on alternative or non-traditional investment opportunities. According to the Angelo, Gordon website, its fixed-income investment strategy includes distressed debt, credit opportunities, public-private investment partnerships, and similar instruments.

One of many media bankruptcies

The media industry has taken a huge hit during this downturn. Just days before NextMedia, Citadel Broadcasting also filed for bankruptcy. On the same day, newspaper publisher Heartland Publications Inc. filed as well. But Jeff Golimowski, communications director for the Outdoor Advertising Association of America, said that the outdoor advertising, in general, has fared well.

“We’ve done better than other traditional media,” he said.

According to the OAAA’s third-quarter industry assessment, revenue was down 17.2 percent compared to the third quarter of 2008. The fourth-quarter and year-end numbers will not be available until March, but Golimowski pointed out that newspapers and magazines have been hit in the 20 percent range.

“While the rest of the media was hunkering down, outdoor was investing in itself,” he added.

The major trend for the outdoor advertising industry is digital. While capital investment in new infrastructure slowed during 2009, it didn’t completely halt, according to Golimowski. Even NextMedia was making some pricy investments in digital billboards. According to a Dec. 21 article in the Wyoming Tribune Eagle, the company was in the process of installing that state’s first digital billboards, with four in progress.

“The industry is set to do what it typically does coming out of a recession, which is to pick up market share,” Golimowski said.

Other articles from this issue:

A-B in talks with city about selling land

Berthoud subdivision to seek home-grown power

E-bike maker test drives Old Town shop

Eco-friendly burials take recycling to logical end

Green Summit set for April with new features, awards

PVHS starts on Water Valley medical fitness center

Riverwalk could also include ice arena

RMI2 welcomes three new companies

Who ya gonna call? Don’t worry about it

Why did the doctors cross the road?

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