Young Broadcasting, Inc., the parent company of WKRN News 2, has canceled an auction that was to be held today of the 10 broadcast stations in the company's portfolio. The news has been met with trepidation from broadcast media insiders who say that the reason for the cancellation of the sale is due to the lack of bids.
A "Cancellation of Auction" notice was filed with the United States Bankruptcy Court in Manhattan that stated, "The Debtors, pursuant to the terms of the Bidding Procedures Order, have determined that the Auction is not necessary and hereby provide notice that the Auction is canceled."
When Young Broadcasting filed for bankruptcy on February 13, their bankruptcy petition listed $575.6 million of assets and $980.4 million of debts as of Sept. 30, 2008 as well as $640 million of publicly traded debt.
The broadcast media insider news website Newsblues.com is reporting that Kevin T. Shea, managing director of Loughlin Meghji + Company, the senior advisors to Young Broadcasting, said that “The lenders will take over the stations and try to realize a better value sometime in the future.”
“Interestingly,” Shea said, “This is an industry where leverage worked very well for decades, so the looming bankruptcies in broadcasting are more a function of seismic shifts in consumer behavior and communications technologies. It’s not a question of who will win, but who will survive and in what form.”
Many employees of Young Broadcasting have told NashvillePost.com that they date the company's troubles back to the ill advised purchase of San Francisco's KRON.
KRON was a highly rated NBC affiliate in that market when it went on the block in the spring of 2000. According to sources, Young Broadcasting felt KRON would be “the jewel in the crown” and ignored warnings that it would lose the NBC broadcasting rights for San Francisco if it bought the station. The group issuing the warnings was none other than NBC, which was bidding against Young.
Young beat out the peacock network, paying $738 million for what is now its largest station. But, true to its word, NBC did not renew its affiliation at the end of 2001, chopping $59 million from Young’s 2002 top line and slashing the value of the station and its parent, which had borrowed heavily to make the purchase. KRON is now ranked fourth in the San Fran market.
Until 2006, KRON was an independent station – the largest in the country – but that year, it affiliated with MyNetworkTV, the division of Fox Entertainment that also has branded WUXP in Nashville.
Because that shift moved much of KRON's syndicated primetime programming into late-night slots that earn fewer ad dollars, the company was forced to write down the value of that programming by $4.5 million.
A call to Young President Deb McDermott regarding the auction was not returned by publication time.
While the state of the economy bears a part of the blame for Young's cancellation of the auction, they are not the only company in the Nashville market to feel its effects. In 2008 the sale of Nashville CBS affiliate WTVF was called of due to turmoil in the credit markets.
Bonten Media Group had said that they planned to acquire NewsChannel 5 from Virginia-based Landmark Communications for a price estimated at more than $200 million. But its financing package from Lehman Brothers fell through as the storied investment bank fell victim to the credit crunch and Bonten was unable to line up another source of funds.