Federal Communications Commission DA 18-568 Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Cumulus Media, Inc., Debtor-in-Possession ) Seeks Approval to Transfer Control of and ) Assign FCC Authorizations and Licenses ) ) Current Shareholders of Cumulus Media, Inc., ) BTC-20180322ABI, et al., Debtor-in-Possession ) BTC-20180322AKR, et al., (Transferors) ) BTCH-20180322ALP, et al., and ) BTC-20180322AMO, et al., Shareholders of Cumulus Media, Inc. (as ) BTCH-20180322AMU, Reorganized) (Transferees) ) BTC-20180322AMV, and ) BTCH-20180322AMW, et al. For Consent to Transfers of Control ) ) ) Cumulus Licensing, LLC ) BALH-20180326ABX, et al. (Assignors) ) and ) The Mainstay Station Trust LLC ) (Assignee) ) ) For Consent to Assignment of Licenses ) MEMORANDUM OPINION AND ORDER Adopted: June 1, 2018 Released: June 1, 2018 By the Chief, Audio Division, Media Bureau: I. INTRODUCTION 1. The Media Bureau (Bureau) has under consideration the captioned transfer of control and assignment applications, as amended, (Transfer Applications and Divestiture Applications, respectively)1 filed by wholly-owned subsidiaries of Cumulus Media, Inc., Debtor-in-Possession (Cumulus).2 The Transfer Applications request Commission consent to implement the Joint Plan of Reorganization of 1 The Transfer Applications were filed on March 22, 2018, and accepted for filing on March 29, 2018. See Broadcast Applications, Public Notice, Report No. 29203 (Mar. 29, 2018). The Divestiture Applications were filed on March 26, 2018, and accepted for filing on March 30, 2018. See Broadcast Applications, Public Notice, Report No. 29204 (Mar. 30, 2018). A list of the stations that are the subject of the proposed transfers and assignments and, for each, its call sign, community of license, facility ID number and assignment or transfer application file number, is attached as the Appendix. 2 See 47 U.S.C. § 310(d). Federal Communications Commission DA 18-568 Cumulus Media Inc. and its Debtor Affiliates pursuant to Chapter 11 of the Bankruptcy Code3 by which Cumulus Media Inc., Debtor-in-Possession (“Cumulus”) and certain of its direct and indirect subsidiaries will emerge from bankruptcy as reorganized entities. Each of the Transfer Applications requests Commission consent to the transfer of control of Cumulus license subsidiaries from the shareholders of Cumulus to the new shareholders of Cumulus (Reorganized Cumulus) in connection with the Reorganization. The Bureau also has before it a Petition to Deny the Transfer Applications (Petition), filed on April 30, 2018, by WGH Communications, Inc.4 As described below, we treat the Petition as an Informal Objection and deny it, and grant the Merger and Divestiture Applications subject to certain conditions.5 II. BACKGROUND 2. The Transaction. Under the Plan, Cumulus proposes to cancel existing debt of Cumulus and to issue, in exchange therefor, among other things, securities in Reorganized Cumulus, which securities shall consist of a combination of (i) Class A Common Stock, which will entitle holders to vote for directors of Reorganized Cumulus, (ii) Class B Common Stock, which will not entitle holders to vote for directors of Reorganized Cumulus, and (iii) Special Warrants which will be exercisable for common stock of Reorganized Cumulus subject to certain conditions. Upon Cumulus’ emergence from bankruptcy, all of the existing capital stock of Cumulus will be cancelled, and all of the new stock will be distributed to holders of debt and other creditors of Cumulus and/or their designees. Following the Transfer of Control, no single person or entity, or group of commonly-controlled persons or entities, will hold a controlling interest in Reorganized Cumulus. Cumulus’ current President and Chief Executive Officer Mary G. Berner will continue to serve in that same capacity upon emergence. 3. Cumulus currently exceeds the local radio ownership rule limit in Section 73.3555(a)(1) of the Commission’s rules (Rules)6 in four Markets.7 Cumulus’ ownership of those stations is grandfathered pursuant to Note 4 of Section 73.3555.8 Note 4 permits existing over-limit station combinations to continue until certain events occur, in which case grandfathering terminates and the licensee must come into compliance with the multiple ownership limits of Section 73.3555(a).9 The filing of a long-form transfer of control application, such as the Transfer Applications, is one of these triggering events.10 In order to comply with the local radio ownership rule, the Parties have filed the Divestiture Applications seeking consent to the assignment of four station licenses (Trust Stations) to the Mainstay 3 See Transfer Applications, Exh. 7, First Amended Joint Plan of Reorganization of Cumulus Media Inc. and its Debtor Affiliates Pursuant to Chapter 11 of the Bankruptcy Code (Joint Plan) and Supplements thereto. The United States Bankruptcy Court for the Southern District of New York approved the Joint Plan on May 10, 2018. Cumulus Media Inc. et al., Findings of Fact, Conclusions of Law, and Order Confirming the Debtors’ First Amended Joint Chapter 11 Plan of Reorganization, Case No. 17-13381 (SCC) (Bankr. S.D.N.Y. May 10, 2018) submitted in Exhibit 7 of the Transfer Applications. 4 Cumulus filed an Opposition to the Petition on May 10, 2018. 5 On April 4, 2018, Cumulus filed: (1) an application (File No. BALH-20180404AAI) seeking Commission consent to the assignment of the license of Station WKQX(FM), Chicago, Illinois, from Merlin Media License, LLC to Cumulus’ subsidiary Radio License Holdings LLC; and (2) an application (BTCH-20180404AAK) for transfer of control of Radio License Holdings LLC that mirrors the Radio License Holdings LLC transfer application pending before us, BTC-20180322ALP. Those applications remain pending. 6 47 CFR § 73.3555(a)(1). 7Albany, Georgia; Columbia, Missouri; Green Bay, Wisconsin; and Toledo, Ohio. 8 47 CFR § 73.3555, Note 4. 9 Id. 10 Id. 2 Federal Communications Commission DA 18-568 Station Trust LLC (MST).11 Cumulus also requests that any Commission approval of the Transfer Applications include authority for the shareholders of Reorganized Cumulus to acquire control of: (1) any authorization issued to Cumulus or its subsidiaries relating to their broadcast businesses while the Transfer Applications are pending before the Commission and during the period required for consummation of the Transfer of Control; and (2) any applications filed by Cumulus or its subsidiaries relating to their broadcast businesses that are pending at the time of consummation. It claims that such action would be consistent with prior Commission decisions.12 4. Petition to Deny. On April 30, 2018, WGH, an unsecured creditor of Cumulus in the bankruptcy proceeding, filed the Petition. WGH observes that the Comprehensive Exhibit filed with the Transfer Applications anticipates the filing of a request for declaratory ruling that Cumulus be permitted to exceed the 25% foreign ownership limitation in Section 310(d) of the Communications Act of 1934, as amended (Act).13 WGH argues that allowing up to 100% foreign ownership of Cumulus would be contrary to the public interest and that the Transfer Applications therefore should be denied.14 It states that granting the Transfer Applications will either result in additional foreign ownership or the issuance of Special Warrants to acquire Cumulus stock that can never be converted because so doing would violate the foreign ownership provisions of the Act; WGH argues that the public interest, as well as that of WGH, would be better served with an alternative plan to emerge from bankruptcy that would not require a request for waiver of Section 310(b)(4).15 Finally, WGH complains that Cumulus has not provided the Commission with information about the full extent of its current foreign ownership, nor has it provided any information about what nations this foreign ownership comes from. WGH states that it is critical for security concerns to know this information before determining whether to grant the Transfer Applications. 16 11 The Divestiture Applications originally also included Station KJMO(FM), Linn, Missouri. The Bureau’s analysis revealed that, even with the divestiture of Station KJMO(FM) to MST, Cumulus would still violate Section 73.3555(a)(1) in the Columbia, Missouri, market, as it would continue to own 5 FM stations in that 18-station Nielsen Market, one station over the limit set by Section73.3555(a)(1). Cumulus resolved this issue by discontinuing the operation of station KZJF(FM), Jefferson City, Missouri on May 25, 2018 and surrendering that Station’s license for cancellation. See Comprehensive Exhibit, Section IV, para. 3, and Letters to Albert Shuldiner, Chief, Audio Division, Media Bureau from David D. Burns (dated May 23, 2018, and May 25, 2018). Consequently, Cumulus amended its proposal to indicate that it would not divest Station KJMO(FM). Comprehensive Exhibit at p.8, n13. The Bureau staff has cancelled the KZJF(FM) station license and deleted its call sign, see Broadcast Actions, Public Notice, Report No. 49249 (to be released Jun. 4, 2018), and will dismiss the KJMO(FM) Divestiture Application (BALH-20180326ABY) upon the release of this Order. 12 Application, Comprehensive Exhibit at 2-3, n.4, citing Applications of AT&T Inc. and Cellco Partnership d/b/a Verizon Wireless, Memorandum Opinion and Order, 25 FCC Rcd 8704, 8773, ¶ 165 (2010); SBC Communications Inc. and AT&T Corp. Applications for Approval of Transfer of Control, Memorandum Opinion