FCC 94-341 Federal Communications Commission Record 10 FCC Red No. 3 Telemundo of Colorado, Before the Inc., Licensee of Federal Communications Commission K49CJ, Colorado Springs, CO BTCTTL-940822LG Washington, D.C. 20554 Telemundo of Santa Fe, Inc., In re Applications of Licensee of K52BS, Santa Fe, NM BTCTTV-940822LH Telemimdo Group, Inc., Debtor in Possession WNJU License Corporation, (Transferor) Licensee of WNJU, Linden, NJ BTCCT-940822KW and Estrella License Corporation, Telemundo Group, Inc. Licensee of (Transferee) KVEA(TV), Corona, CA BTCCT-940822LC K57CD, San Diego, CA BTCTTL-940822LD For Transfer of Control of Telemundo of Puerto Rico, MEMORANDUM OPINION AND ORDER Inc., Licensee of Adopted: December 23, 1994; Released: December 23, 1994 WKAQ-TV, San Juan, P.R. File Nos. BTCCT-940922KI W09AT, Fajardo, P.R. BTCTTV-940822KJ By the Commission: W32AJ, Utuado, P.R. BTCTT-940822KK W68BU, Adjuntas, P.R. BTCTT-940822KL 1. The Commission has before it for consideration the unopposed applications for transfer of control of the above- Telemundo of Florida, captioned licensees from Telemundo Group, Inc., Debtor Inc., Licensee of in Possession ("Debtor") to Telemundo Group, Inc. ("Re organized Telemundo"), the entity set to emerge from fed WSCV(TV), Fort Lauderdale, FL BTCTT-940822KM eral bankruptcy protection pursuant to a Chapter 11 plan of reorganization confirmed by the United States Bank Telemundo of Northern ruptcy Court for the Southern District of New York. See California, Inc., Licensee of Order Pursuant to Section 1129 of the Bankruptcy Code KSTS(TV), San Jose, CA BTCCT-940822KN Confirming the Debtor©s Second Amended Chapter 11 Plan K15CU, Salinas, CA BTCTTL-940822KO of Reorganization (Bankruptcy Order), Case No. 93-B-42967 (Bankr. S.D. N.Y. July 20, 1994). Because principals or K52CK, Stockton/Lodi, CA BTCTTL-940822KP affiliates of some of the proposed attributable stockholders K47DQ, Sacramento, CA BTCTTL-940822KQ of Reorganized Telemundo hold conflicting attributable in K27EI, Santa Maria, CA BTCTTL-940822KR terests in other broadcast stations, as well as a K39DH, Ogden, UT BTCTT-940822KS nonattributable interest in a television station in the same K48EJ, Salt Lake City, UT BTCTTL-940822KT market as a Reorganized Telemundo television station, the applicants also request relief from the Commission©s mul W32AY, Boston, MA BTCTTL-940822KU tiple ownership rules and cross-interest policy. K61FI, Modesto, CA BTCTTL-940822KV Telemundo of Galveston- BACKGROUND Houston, Inc., Licensee 2. Debtor, a Delaware corporation, owns Telemundo, or Permittee of one of two major Hispanic broadcast television networks KTMD(TV), Galveston, TX BTCCT-940822KX serving the United States. Through its seven full power television stations and 19 low power television and K60EE, Odessa, TX BTCTTL-940822KY translator stations, according to Debtor, Telemundo serves K49CD, Odessa, TX BTCTTL-940822KZ more than 50 markets in the United States and Puerto K40DX, Abilene, TX BTCTTL-940822LA Rico, reaching more than 85 percent of all Hispanic house K36DV, Amarillo, TX BTCTTL-940822LB holds in the country. Additionally, Debtor produces Span ish-language programming, making available to its affiliates Telemundo of San Antonio, and owned and operated stations approximately 130 hours per week of such programming. Inc., Licensee of 3. For nearly three years, according to the applicants, KVDA(TV), San Antonio, TX BTCCT-940822LE Debtor has failed to make principal or interest payments on its outstanding debt. In August 1993, Telemundo peti Telemundo of Austin, Inc., tioned for Chapter 11 bankruptcy protection and thereafter Licensee of sought Commission approval for an involuntary transfer of K11SF, Austin, TX BTCTVL-940822LF control of its licensee subsidiaries to Debtor. See FCC File Nos. BTCTTV/BTCTT/BTCTTL-940810KF through KZ 1104 10 FCC Red No. 3 Federal Communications Commission Record FCC 94-341 (granting transfer of control of the licensee subsidiaries requests involving radio and television station combinations from Telemundo Group, Inc. to Debtor). A second amend in the top 25 markets, as defined by Arbitron Ratings ed plan of reorganization (the "Plan") structured by Debtor Company, where at least 30 separately owned, operated and and accepted by those creditors entitled to vote thereon was controlled broadcast licensees, or "voices," will remain confirmed by the bankruptcy court on July 20, 1994. See after the proposed combination. In calculating.the number Bankruptcy Order, supra. Under the Plan, the claims of of broadcast stations in a particular market, we include all certain creditors are to be discharged in exchange for, commercial and noncommercial full-power television sta among other things, an equity stake in Reorganized tion licensees in the relevant ADI and all operating AM Telemundo. and FM radio station licensees in the relevant television 4. Upon consummation of the Plan, which is subject to metropolitan market. Id, The number of "voices" in a Commission approval, the capital stock of Reorganized given market is evaluated in accordance with the attribu Telemundo will consist entirely of voting common stock, tion provisions of our local ownership rules, in which whose holders will be: TLMD Partners II, L.L.C. (15.5%); persons have a "cognizable" interest in a broadcast station Reliance Insurance Company (10%); Bastion Capital Fund, if they serve as an officer, director, partner, or owner of at L.P. (up to approximately 16%); Leon Black (approxi least five percent of the voting stock of the licensee. Id.; see mately 2-8%);© and various rights holders and other credi also id. at 1759 n.87. tors, none of which individually will hold an attributable 8. In support of its waiver request, Debtor notes that Los 5% interest (approximately 50%). The composition of Re Angeles, the ADI within which each station is located, is organized Telemundo©s initial nine-member board of direc the second largest market in the country, as reported in tors results from negotiations among Debtor, its current Broadcasting & Cable Yearbook 1994. That market sustains majority stockholder, and the junior and senior creditors.2 21 full-service television stations and 79 AM and FM radio 5. With four exceptions, the corporate restructuring and stations. Of these broadcast stations, Debtor©s exhibit in the involvement of parties to this application are consistent dicates, at least 80 will be separately owned, operated and with the Commission©s ownership rules and policies, as controlled after consummation of the Plan. Accordingly, well as with the Communications Act. Those exceptions Debtor contends, its waiver request for the Los Angeles are as discussed below. Permanent waiver of the one-to- market satisfies the "top 25 markets/30 voices" presumptive a-market rule waiver standard set forth in Second Report and Order. 6. Daniel D. Villanueva is a co-trustee of the Daniel 9. Having reviewed the showing submitted by Debtor, we Villanueva Living Trust, which is the sole stockholder of find that Mr. Villanueva©s common ownership interests one of the two general partners of Bastion Partners which, will not result in fewer than 30 separately owned, operated in turn, serves as the sole general partner of Bastion and controlled broadcast stations in Los Angeles, the sec Capital Fund, L.P. ("Bastion Capital"). The potentially 16 ond largest market. Thus, Debtor has provided the neces percent of Telemundo stock owned by Bastion Capital is, sary documentation to meet the "top 25 markets/30 voices" therefore, attributable to Mr. Villanueva, who wholly owns standard with regard to the KVEA(TV)-KCTQ(AM) com BuenaVentura Communications, Inc., the licensee of bination.3 We conclude, therefore, that grant of the waiver KCTQ(AM), Thousand Oaks, California. Because the permitting Mr. Villanueva to hold interests in both stations Grade A signal of Debtor©s KVEA(TV), Corona, California, is in the public interest. encompasses the entire community of Thousand Oaks, Villanueva©s ownership of the radio station and his attrib utable interest in the television station would be inconsis Temporary waiver of the duopoly rule tent with the one-to-a-market rule. That rule bars common 10. Mr. Villanueva also wholly owns Villanueva Media, ownership of television and radio stations in the same Inc., which holds a 20% general partnership and 55% market. See 47 C.F.R. §73.3555(c). limited partnership interest in KSMS-TV, L.P., the licensee 7. In Second Report and Order in MM Docket No. 87-7, of KSMS-TV, Channel 67, Monterey, California. Because 4 F.C.C. Red 1741, 1751, reconsidered in part, 4 F.C.C. Red the Grade A contour of KSMS-TV overlaps with that of 6489 (1989), the Commission concluded that it will "look Reorganized Telemundo©s KSTS(TV), Channel 48, San favorably" upon, and will be "predisposed to grant," waiver Jose, California, Mr. Villanueva©s attributable interests in 1 Earlier, the applicants had proposed that 24.5% of the voting interest of 6.8% to 9.4%, will total up to 16.6%. Black, who was common stock of Reorganized Telemundo would be owned by not originally scheduled to acquire an interest, will acquire TLMD Partners II, L.L.C. ("TLMD"), an entity composed ulti between 2% and 8% of that 9% TLMD stock interest. mately of members John J. Hannan and Michael D. Weiner, 2 The initial, bankruptcy court-approved board members of which would receive the stock pursuant to claims received from Reorganized Telemundo, all U.S. citizens, were designated by AIF II, L.P. ("AIF") and Artemis America III, L.L.C. ("Ar Debtor©s current management (Joaquin F. Blaya), Reliance In temis"). However, in amendments filed on December 19 and 20, surance Company (George E. Bello and Saul P. Steinberg), the 1994, the applicants represent that AIF and Artemis will com junior creditors (Alan Kolod), and the senior creditors (John J. prise the complete membership of TLMD, in lieu of intervening Hannan and Bruce H.