In a deal announced in early August to sell its tower portfolio to Vertical Bridge for $213 million, Cumulus Media yesterday said it closed the first part of the transaction. The initial closing garnered the company $208 million in gross proceeds which will be used to pay down debt following Cumulus’ emergence from bankruptcy. The portfolio consists of roughly 250 sites located in 32 states.
“We are thrilled to have expeditiously completed the first closing of this significant transaction,” said Cumulus President/CEO Mary Berner. “Pro forma for its completion and based on our Q2 ending cash balance, we will have reduced net debt by nearly $325 million during 2020 and by nearly $580 million since emerging from bankruptcy in 2018. Our further improved liquidity position and covenant-lite, long-dated debt will continue to support our growth initiatives and allow us to take advantage of accretive opportunities as we navigate through near-term uncertainties to drive long-term shareholder value.”
After transaction fees and expenses and related costs, the company received approximately $202 million in net proceeds at the initial closing.
At closing, Cumulus entered into a master lease agreement for the continued use of substantially all of the towers that were sold:
- The initial term of the lease is ten (10) years, followed by five (5) option periods of five (5) years each.
- The annual lease payment obligation for the assets leased back in the initial closing is approximately $13.2 million, subject to customary escalators, and will be accounted for as a reduction of the financial liability and interest expense.
- Annual tenant revenues of approximately $2.2 million and operating expenses of approximately $2.3 million (of which approximately $1.5 million is non-cash intangible amortization) will no longer be reflected in the company’s financial statements. The company will report non-cash imputed rental income for tower sites where it continues to use a portion of the tower along with other existing and future tenants.
- The transaction will not have any effect on the company’s current broadcast operations according to the company
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