A Curious Snag In Debt-For-Equity Restructurings As Goldman And JPM Do A Stealthy Roll Up Of The Media Industry

Tyler Durden's picture

While most hedge funds traditionally have an on-shore and an off-shore investment vehicle, the bulk of investable capital is allocated to accounts domiciled in the Caymans, Bahamas, Isle of Man, or some other tax "friendly" country, as LPs are never too crazy about that little snag known as taxes, and offshoring provides some nice and useful alternatives to said snag. Distressed hedge funds, those that acquire either secured or unsecured debt with the hope of equitization, are no exception. Yet equitization by essentially foreign vehicles is starting to get some dirty looks by regulators, which limit "foreign" equity investments in traditionally American companies and sectors. Some developments in the upcoming restructurings of media companies may put a new wrinkle on what is promptly becoming the most prevalent and profitable means for hedge funds to invest capital (not by necessity but for the simple reason that if a sector is not too big to fail, it is likely failing massively). The case of Citadel Broadcasting, which Zero Hedge discussed recently as commentary highlighting the lunacy of the current investment climate, is just such an example.

According to the Wall Street Journal:

Wall Street lenders are tripping over federal media-ownership rules as
they find themselves the unexpected owners of several distressed radio,
television and newspaper companies.

The issue has taken center stage at Citadel Broadcasting Corp., as
one of the U.S.'s largest radio broadcasters races to revamp its
balance sheet. Citadel has offered senior lenders owed $2 billion --
including J.P. Morgan Chase & Co., General Electric Co.'s GE Capital and ING Groep NV -- a deal that would exchange a big chunk of debt for equity, people familiar with the negotiations said.

On Wednesday, Citadel faced a deadline to make a $2 million interest
payment, but its status remained unclear. Talks have slowed in recent
days in part because some lenders have been caught off-guard by Federal
Communications Commission rules designed to limit concentrated holdings
of media firms, said people familiar with the matter.

For big banks and hedge funds holding debt in everything from radio and
television stations to newspapers, FCC rules have made restructurings
more complex. The FCC must approve media sales and has specific rules
that limit ownership of multiple media outlets in individual markets,
even when such shareholder stakes are small.

The calculus can be even more difficult for hedge funds, some of which
are registered offshore. The FCC caps foreign ownership at 20% of a
U.S. broadcaster -- 25% if the stake is through a holding company --
which can change how new ownership stakes are structured.

And lest someone think that this yet another shady space of the corporate finance world may be one that has somehow avoided the tentacles of the squid, think again:

J.P. Morgan and Goldman Sachs Group Inc. are also among radio stations' leading lenders.

Goldman Sachs and other lenders just swapped debt for 85% of Nassau
Broadcasting Partners LP's equity. Nassau operates 51 radio stations
along the East Coast. Nassau had to put its Cape Cod, Mass., stations
into a separate company, because Goldman has another radio investment
in Cape Cod and didn't want its stake to cause a conflict with the FCC.

Throw companies like Tribune into the mix where JP Morgan will allegedly end up with an majority equity stake, and one wonders why Goldman and JPM were so eager to provide "rescue" financings to virtually the entire distressed media space: both companies knew too well that sooner or later they would end up with full equity control over essentially the most coveted industry: thousands of TV stations, radio channels, newspaper and magazines. If you thought the media propaganda was unbearable now, just wait. Nonetheless, one doubts that much will be made by the FCC of JP Morgan's or Goldman Sachs' stealthily encroaching control of the entire media world. After all, they already pretty much already control the airwaves. This way their domination of the 4th estate and the idiot tube will soon be complete.

As for traditional hedge funds who think they are on equal footing with the big boys, they may be in for a surprise.

At ION Media Networks
Inc., lenders are poised to get ownership of the television company
while doing away with some $2.7 billion in debt and other obligations.
ION's lenders include investment firms Avenue Capital, Black Diamond,
Canyon and Trilogy Portfolio Co.

Alas, all these funds operate primarily out of their offshore accounts. So while they just now start the long, hard process of convincing the FCC they have nothing but the best P&L intentions, Goldman and JPM, or better known as the Treasury and the Fed, will have long cemented their controlling stakes in a streamlined, deleveraged media industry.

Of course, as any assertions that select financial organizations seek to control the media usually are met with counter allegations of the "tin-foil" hat wearing variety, Zero Hedge will, over the coming week, demonstrate in which media companies Goldman and JP Morgan currently are the key fulcrum security holders, and where they will soon have equity-stake dominance, read: full freedom to dictate what, who and why, when and where appears in print or on the airwaves. We will also provide a breakdown of just how many TV station affiliates, radio and cell phone towers, newspapers, magazine, pamphlets and blogs will shortly be under the full equity control of the two Wall Street firms.

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. . .'s picture

Tyler, Tyler, Tyler

39 of 40 senate republicans wrote a letter to Geithner requesting not to extend TARP handouts past December.


msorense's picture

Those worthless pieces of shit.  Like Faber, I have ZERO confidence in the leadership of this country. TARP is so 2008!  It's all about secret Fed bailouts now:


Is anyone covering this shit or are all the banks getting secret $$$$$ infusions.  At what point to us bears give up and just start shorting Treasuries? 

Hephasteus's picture

Lol the comments on there. Dollars are fungible. I want to print some dollars and buy stuff with it cause dey is fungible and theres NOTHING wrong with DAT. It's just perversion hatin. Just because some fool don't have no fungibility doesn't mean the people with fungibility shouldn't be fungibilitatin everything they feel like.

Anonymous's picture

I remember that part of the hearings. Grayson asked about who the currency swaps went to. Bernanke said that they went to a few other central banks around the world.

This is exactly what currency swaps are intended for people!
The whole point is to provide USD to other central banks so that people in those countries can borrow USD and buy US goods and services.

It's not a bailout, it's a swap - look it up!

Grayson is an idiot.

Anonymous's picture

He's only an idiot if they buy US goods and services. The jury is still out on that.

Anonymous's picture

Good luck to GOP majority which violated every sacred
trust of free markets when it ruled from
1994 to 2006. GOP may rue marginalizing Ron Paul
and itself. D incumbent majority may not be reelected either as enough people figure out false flag ops on both sides of the aisle by the masquers behind the throne...

"Debt for Equity No Way"
say millions of little people who left capital markets in 2000 and 2008 never to return. They cash in their retirement accounts en masse while institutional risk
money managers wake up one by one to the new reality:
The only place to survive may be US cash, the dollar.
And few people may trust Uncle Sam enough to buy Savings Bonds with enormous real returns after a deflationary collapse of Biblical proportions...

China PRC Cosco tried to buy Long Beach Naval base and
it did not fly. But they own or control almost every
other significant cargo container port as the Bible prophesied. Now CIC buying mortgages? HAHAHAHA.
Fed bought 80+% of US Agencies according to WSJ.
Just a matter of time until House of Cards
collapses amidst mountains of official denials and mass media propaganda.

Why are so many offshore hedge fund managers
cashing in chips left and retiring offshore to grow
their own? Do they see the impending failure of capital markets trading only with Fed, GE, GS, MS, JPM and Treasury?
Can IMF, World Bank and sovereign surplus nations really put Humpty Dumpty together again? Ask BB, HP, LS, TG
and 0, not to be confused with Zero Hedge...

The dirty little secret of offshore havens:
Treasury Promis PTech refuse to publicly prosecute dirty money stashed by criminal elected and appointed leaders for sovereign clients, with such unwinnable taxpayer scams as Vietnam Golden Triangle, Iran Contra Columbia Panama, Savings and Loan RTC Crisis, Welfare for Illegals, Afghanistan Pakistan Iraq, TARP PPPIP et alia...

Be a tracker for survival: study the tenuous trails of Carlyle Moon Paraguay House of Rothschild Rockefeller Saud carefully.

Madoff and Stanford minor scapegoat asset pimples hide
bank corporate offshore skimming, criminal corruption. massive malfeasance and titanic theft from citizens, consumers and wage slaves. Only the little people paid taxes...

The inevitable cure is the collapse of criminal empires
by starving them of cash. Let them eat gold...

2010 the year of the duly elected Constitutional
Independent Citizen or Write-in Annette Funicello for
Prez? The choice is ours...


Fritz's picture

Coming soon to a TV station near you:

GSBS TV - the "all greed, all the time" channel.

...including the new hit series; Attack of the Vampire Squid.

Anonymous's picture

meanwhile, over at (JP)MTV, an oldie but a goodie:
(featuring all JPM-owned REOs of course)

Anonymous's picture

Who cares at this point... It's time to fold up the tents, this country has HAD IT

RobotTrader's picture

Might as well watch some of the others get squeezed...


deadhead's picture

Robo...picture of A.J.Cohen would be fitting.

Anonymous's picture

So who's the head on a stick?

Anonymous's picture

Obama open to newspaper bailout bill
By Michael O'Brien - 09/20/09 04:24 PM ET
The president said he is "happy to look at" bills before Congress that would give struggling news organizations tax breaks if they were to restructure as nonprofit businesses.

"I haven't seen detailed proposals yet, but I'll be happy to look at them," Obama told the editors of the Pittsburgh Post-Gazette and Toledo Blade in an interview.

Sen. Ben Cardin (D-Md.) has introduced S. 673, the so-called "Newspaper Revitalization Act," that would give outlets tax deals if they were to restructure as 501(c)(3) corporations. That bill has so far attracted one cosponsor, Cardin's Maryland colleague Sen. Barbara Mikulski (D).

White House Press Secretary Robert Gibbs had played down the possibility of government assistance for news organizations, which have been hit by an economic downturn and dwindling ad revenue.

In early May, Gibbs said that while he hadn't asked the president specifically about bailout options for newspapers, "I don't know what, in all honesty, government can do about it."

Obama said that good journalism is "critical to the health of our democracy," but expressed concern toward growing tends in reporting -- especially on political blogs, from which a groundswell of support for his campaign emerged during the presidential election.

"I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding," he said.

Project Mayhem's picture

Wow. I thought this was an Onion article at first.   Yeah I agree -- blogs are such terrible sources of information. 


Okay Obama, with this story, you just made This Week In Mayhem geopolitics section!!  Congratulations!


Anonymous's picture

"I am concerned that if the direction of the news is all blogosphere, all opinions, with no serious fact-checking, no serious attempts to put stories in context, that what you will end up getting is people shouting at each other across the void but not a lot of mutual understanding," he said.

you mean like the Puffington Host right?

London Banker's picture

I think Washington prefers serious "fact checkers" like Judith Miller and Adam Nagourney of the New York Times, who will print whatever they are spoon fed by anonymous sources about anthrax, WMDs, Iranian nukes, OBL's latest threat, and other warmongering BS.

Without the mainstream channels, the only information getting widespread coverage might resemble reality too much for convenience of the politicians' agendas.  Or worse yet, people might turn to foreign news media like the BBC or Asia Times and learn that America is more at risk from the corruption within than from its "enemies" abroad.

Anonymous's picture

can you say the Great Satan

Marge N Call's picture

"I am concerned that if the direction of the news is all blogosphere...... that what you will end up getting is news from people that are not owned by the same people that own me, which could really derail the propaganda stream and provide a lot of mutual understanding," he said.

Shark has officially been jumped.

Mediocritas's picture

Yeah! Let's bail out the newspapers. That's great! We should also go back in time and bail out the horse and cart industry about the time that cars were invented.

Cursive's picture

They are welcome to have these "assets."  Kinda reminds me of when the Japanese bought 30 Rock.  Lots of Americans panicked, but what where the Nips gonna do, move it?  Somebody has got to be a custodian every now and then and I'd say that GS and JPM are expanding their balance sheets too much.  Not that it will matter.  Obama will surely backstop them.

Project Mayhem's picture

What I want to know is how this fits in with the "cash-for-calamari" Blankfein corruption scandal

Anonymous's picture

cash-for-calamari" Blankfein corruption scandal!!!

Think about it, you can't make this shit up..

We should have the complete federal government be a contestant on the fucking GONG SHOW..


deadhead's picture

TO: Hank

FROM: Rahmster

Your selfless duty to our country has not gone unnoticed as I reiterate our country’s deepest gratitude for your objective and impartial approach to solving our nation’s banking crisis.  Your actions have resulted in not only stabilizing our financial system, but strengthening it through your policy decisions to diversify our systemic risk among a multitude of 1, maybe 2, financial organizations.  

Though you find yourself now in the blissful state of retirement wiling away the days with defense counsel, I must ask you to return to Washington as your country desperately needs you once again.

The Federal Communications Commission is in danger of failing due to an antiquated and capital resistant  set of rules that has threatened our media and their precious right to free speech.  Your country needs a person with your specific background and experience in debt to equity conversions to guide the FCC through the necessary changes to ensure a bold new world of a reinvigorated media and communications infrastructure.  Truly, we feel your presence and connections to others who want to be a “force for good” in America can do for the media in this country what you did for our banking system.

Hephasteus's picture


Since it will be not for profit it will have steady incomes like the SEC and be a good stabilizing force for good. Pay Per Propaganda should be a hit. I'm feeling monetized already.

fotokemist's picture

The range of my personal friends includes laborers with chicken producers, school teachers, nurses, physicians, university professors, etc.  I know of not one who supports ever expanding bailouts.

This situation is going to end badly if congress does not stop redistributing the little wealth left in our country.

I hope everyone is corresponding with their congress critters regularly.


Anonymous's picture

fotokem, i hope you guys got your b&w process straightened out because i have a sneaking suspicion that grainy old footage of souplines, tent cities, world war, etc is soon going to be making a comeback.

chumbawamba's picture

Yes, I correspond with them often to tell them what whores they are.

Bring on the revolution already.  I'm tired of waiting.

I am Chumbawamba.

john_connor's picture

I only read ZH for my news, so the squid can suck on someone else's face.  The underground revolution has started.

laughing_swordfish's picture

Come on now.

You don't seriously think that control of the media by the likes of JPM and  

GS is going to change anything do you?

Look at the WSJ since Murdoch took it over.

'Nuff said



Anonymous's picture

This will just allow GS and JPM to try out some new manipulation...I mean new PR campaigns...

Edward Bernays would be proud.

AN0NYM0US's picture

PM a companion article to the newspaper bailout theme (perhaps from a newspaper that will be a beneficiary of said bailout)


Unemployed homeowners could get financial assistance

WASHINGTON — The Obama administration is engaged in high-level talks about providing financial assistance to homeowners who've lost their jobs and can't afford their mortgage payments....


Anonymous's picture

Anybody remember the film Brazil with R DeNero?

Anonymous's picture

Banks own wall street and media....get ready for grocery stores to be next. What we see think eat and invest. Oh fuckkkkkkk

aswipe's picture

Watch out for American Investor Idol with Nancy Pelosi, Ozzy Ozbourne and the recently made available Beaker as your esteemed judges.




Anonymous's picture

Deleted here alot

arnoldsimage's picture

they are really not that bright... they're all going to hell.

max2205's picture

Go see Brazil. GS JPM is not just for breakfest anymore

Anonymous's picture

Nobody believes what's on the tube or radio anyway.

GlassHammer's picture

Since journalistic integrity is descending faster than Rosie O'donnell chasing a falling doughnut, I weep for the future of mass media.


Anonymous's picture

I'm incensed!

How dare you call my tube an idiot!!!

I can see America's future clearly now -

[cabinet has been debating putting water on the plants instead of Brawndo which contains electrolytes]

Pvt. Joe Bowers: What *are* these electrolytes? Do you even know?

Secretary of State: They're... what they use to make Brawndo!

Pvt. Joe Bowers: But *why* do they use them to make Brawndo?

Secretary of Defense: [raises hand after a pause] Because Brawndo's got electrolytes.

(Source IMDB, Movie - Idiocracy)

Pvt. Joe Bowers: [addressing Congress] ... And there was a time in this country, a long time ago, when reading wasn't just for fags and neither was writing. People wrote books and movies, movies that had stories so you cared whose ass it was and why it was farting, and I believe that time can come again!

Make it so!

Mr. Mandelbrot's picture

Idiocracy is one of my favorite movies of all time!!!!!!!  We must work now to stop it from becoming prophetic.

chumbawamba's picture

Are you kidding?  We already live in an idiocracy.  Take advantage of it.  Lots of stupid people to cheat.  Like shooting fish in a barrel.

I am Chumbawamba.

Anonymous's picture

Good grief. Did you get rejected for a job at GS or something like that? This level of paranoia is ridiculous. We're very much in tin-foil hat/black helicopter territory here.

Anonymous's picture

If they can somehow get the internet under their control then it's over.

JohnKing's picture

That's Eric Schmidt's job, Google is the internet lord.

Anonymous's picture

Propaganda? You have to understand that Hank Greenberg-AIG, Harvey Blankfein-Goldman, Dimond, Goldman, Lehman, Bear, Geitner, Summers, cass sumstein, mary shapiro, berhake, greenspan, axelrod, ram emmanuel, feldman, rattner, barovsky, sheila bair, bloom, bloomberg, sam zell, sulzberger-new york times, sumner lipshitz redstone, see us as cattle to be put into cattle cars. We are nothing but animals to these people.

Anonymous's picture

What we need is an Internet TV channel.

I claim a 10% stake minimum right now for branding it "The Real News" or maybe "Revolution 2.0".

It needs to discuss the issue of constant disinformation and propaganda. Something that can counter the MSM in realtime, offer better perspectives, more facts.

Discuss alternate viewpoints such as Austrian economic theory, electric cosmos, social credit, abiotic theory of oil...

Anonymous's picture

'The television will not be revolutionized'

you could try.. http://therealnews.com (there goes your 10% ;)
plenty more out there.. Hunt and yea shall find.

bout time people the world over stopped staring at the telescreen in the corner, put down the vested interest papers and started waking up to what's actually happening out there.. I look forward to the day.

btw, dunno if you've done any research but i'm avoiding the vaccine like the plague it actually is.

good luck out there kids! ;)