Declaration of John Grossi in Support of Chapter 11 Petitions and First Day Motions
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Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 1 of 77 Justin Bernbrock (pro hac vice admission pending) Michael A. Condyles (VA 27807) Bryan Uelk (pro hac vice admission pending) Peter J. Barrett (VA 46179) SHEPPARD, MULLIN, RICHTER & HAMPTON LLP Jeremy S. Williams (VA 77469) 70 West Madison Street, 48th Floor Brian H. Richardson (VA 92477) Chicago, Illinois 60602 KUTAK ROCK LLP Telephone: (312) 499-6300 901 East Byrd Street, Suite 1000 Facsimile: (312) 499-6301 Richmond, Virginia 23219-4071 Telephone: (804) 644-1700 -and- Facsimile: (804) 783-6192 Colin Davidson (pro hac vice admission pending) SHEPPARD, MULLIN, RICHTER & HAMPTON LLP 30 Rockefeller Plaza New York, New York 10112 Telephone: (212) 653-8700 Facsimile: (212) 653-8701 Proposed Co-Counsel to the Debtors and Debtors-in-Possession IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF VIRGINIA RICHMOND DIVISION ) In re: ) Chapter 11 ) ALPHA MEDIA HOLDINGS LLC, et al.,1 ) Case No. 21-30209 (KRH) ) Debtors. ) (Joint Administration Requested) ) DECLARATION OF JOHN GROSSI IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS I, John Grossi, under penalty of perjury, declare as follows: 1. I am the Chief Financial Officer (“CFO”) for each of the above-captioned debtors and debtors-in-possession (collectively, the “Debtors” or “Alpha Media”). 2. I have served as Alpha Media’s CFO since January 2017. I received a Bachelor of Business Administration from the University of Notre Dame in 1989 and a Master of Business 1 The Debtors in these chapter 11 cases, along with the last four digits of each debtor’s federal tax identification number, are: Alpha Media Holdings LLC (3634), Alpha Media USA LLC (9105), Alpha 3E Corporation (0912), Alpha Media LLC (5950), Alpha 3E Holding Corporation (9792), Alpha Media Licensee LLC (0894), Alpha Media Communications Inc. (5838), Alpha 3E Licensee LLC (6446), Alpha Media of Brookings Inc. (7149), Alpha Media of Columbus Inc. (7140), Alpha Media of Fort Dodge Inc. (2022), Alpha Media of Joliet Inc. (7142), Alpha Media of Lincoln Inc. (7141), Alpha Media of Luverne Inc. (7154), and Alpha Media of Mason City Inc. (3996). Alpha Media Communications LLC does not have a federal employee identification number. The mailing address for the Debtors is 1211 SW 5th Avenue, Suite 750, Portland, OR 97204. SMRH:4822-3760-1496.8 -1- 012421 59ZT-318353 Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 2 of 77 Administration from the University of Washington in 1995. I have more than nineteen years of experience serving in finance and leadership roles for media companies. 3. In my capacity as Alpha Media’s CFO, I am generally familiar with the Debtors’ day-to-day operations, business and financial affairs, and books and records. I submit this declaration to assist the Court and parties-in-interest in understanding the circumstances compelling the commencement of these chapter 11 cases and in support of the Debtors’ chapter 11 petitions and certain motions and applications filed today. 4. Except as otherwise indicated, all facts in this declaration are based upon my personal knowledge, my discussions with the Debtors’ management team and advisors, my review of relevant documents and information concerning the Debtors’ operations, financial affairs, and restructuring initiatives, or my opinions based upon my experience and knowledge. I am over the age of eighteen and authorized to submit this declaration on behalf of the Debtors. If called upon as a witness, I could and would testify competently to the facts set forth in this declaration. I. Introduction 5. Alpha Media is the largest privately-held radio broadcast and multimedia company in the United States. Formed in 2009 by a veteran radio executive, Alpha Media grew through acquisitions and now owns or operates more than 200 radio stations that provide local news, sports, music, and entertainment to a weekly audience of more than 11 million listeners in 44 communities across the United States. In addition to its radio stations, Alpha Media provides digital content through more than 200 websites and countless mobile applications and digital streaming services. Alpha Media generates the majority of its revenue from the sale of advertising time on its radio stations to a wide range of local, regional, and national advertisers in SMRH:4822-3760-1496.8 -2- 012421 59ZT-318353 Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 3 of 77 consumer-focused industries, including automotive, entertainment, retail and financial services. Alpha Media’s strong relationships with local communities and highly engaging live content have cultivated a passionate listener base and attractive platform for advertisers, both of which ultimately distinguish Alpha Media from other top radio broadcasters. 6. Following a healthy financial performance in 2019, the Debtors experienced significant headwinds beginning in the first quarter of 2020 due to macroeconomic factors brought on by the COVID-19 pandemic. In response, the Debtors commenced these chapter 11 cases to implement the terms of a comprehensive, balance-sheet restructuring pursuant to that certain restructuring support agreement, dated January 24, 2021, by and among the Debtors, their second lien lenders, and holders of their unsecured notes (the “Restructuring Support Agreement”), a copy of which is attached hereto as Exhibit B, and the chapter 11 plan (the “Plan”) that the Debtors have filed contemporaneously herewith. The restructuring transactions contemplated by the Plan and Restructuring Support Agreement will effectuate a recapitalization of the Debtors’ approximately $267 million of prepetition funded indebtedness, preserve the Debtors’ ongoing business operations with limited interruption for their customers and employees, and ensure that the Debtors have access to sufficient liquidity not only to weather the economic downturn brought on by COVID-19, but to succeed upon emergence from bankruptcy. 7. As discussed in more detail herein, the filing of these chapter 11 cases follows internal operational restructuring initiatives, the appointment of a special independent committee to the board of directors of Alpha Media Holdings LLC (“Alpha Holdings”), the direct or indirect parent of each of the Debtors, and several months of arm’s-length, good faith restructuring negotiations with the Debtors’ secured lenders, which, collectively has paved the way for the ultimate execution of the Restructuring Support Agreement. SMRH:4822-3760-1496.8 -3- 012421 59ZT-318353 Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 4 of 77 8. To familiarize the Court with the Debtors, their collective business enterprise, the circumstances precipitating these chapter 11 cases, and the relief the Debtors are seeking in those certain motions and applications filed contemporaneously herewith, the remainder of this declaration is organized as follows: Part II provides a general overview of the Debtors’ corporate history and operations; Part III provides an overview of the Debtors’ prepetition corporate and capital structure; Part IV describes the circumstances leading to these chapter 11 cases, including the Debtors’ prepetition restructuring efforts and the material terms of the Plan; and Part V, along with the exhibit referenced therein, sets forth the evidentiary basis for the relief requested in each of the first day pleadings. II. Corporate History and Business Operations. 9. Formed in 2009 by a veteran radio executive as “Alpha Broadcasting,” Alpha Media grew through acquisitions and, in 2014, merged with L&L Broadcasting to form Alpha Media. As set forth in the illustration below, Alpha Media now owns or operates more than 200 radio stations across the United States, including four stations in Virginia.2 2 These stations are a vital component of the Debtors’ business operations and comprise an integral part of the overall revenue stream. Specifically, Fredericksburg, Virginia is the home to WFLS FM 93.3 “Today’s New Country” and WNTX AM 1350 News, Talk, and Sports. WVBX FM 99.3 serves Spotsylvania county, and airs Brooke & Jeffrey in the morning. WWUZ FM 96.9 provides classic rock to the Bowling Green, Virginia community, and airs Alice Cooper’s evening classic rock show. In addition, Debtor Alpha Media LLC is party to four leases of real property located in the Eastern District of Virginia. SMRH:4822-3760-1496.8 -4- 012421 59ZT-318353 Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 5 of 77 10. In each of the markets in which it operates, Alpha Media focuses on creating and maintaining deep relationships with its listeners, local advertisers, and local communities by pursuing a strategy that is both live and local in nature. This means that local news, sports, music, entertainment, and live on-air personalities comprise the majority of over-the-air content to ensure broad appeal in each local market. Alpha Media further focuses on the local communities that it serves by supporting hundreds of charities and community events annually through, for example, on-air and online promotion, on-site appearances, donation of auction items and air-time, and hosting local events by on-air personalities. 11. In addition to its radio stations, Alpha Media offers consumers a collection of companion digital content, including online articles and videos, mobile applications, and streaming services. Alpha Media also hosts live performances in each of its three intimate performance venues in Oregon, Texas, and Wisconsin. Through its digital content and performance venues, Alpha Media offers its customers marketing and advertising solutions that are not otherwise directly available through radio. SMRH:4822-3760-1496.8 -5- 012421 59ZT-318353 Case 21-30209-KRH Doc 22 Filed 01/25/21 Entered 01/25/21 05:34:21 Desc Main Document Page 6 of 77 12.