Spanish Broadcasting System - Chapter 11 Case Summary

Business Description

Headquartered in Miami, FL, Spanish Broadcasting System, Inc. ("SBS"), together with its affiliated debtors and debtors in possession (collectively, the "Debtors" or the "Company"), is a premier cross-platform media company connecting U.S. Hispanics through radio, television, and digital platforms.

• Founded in 1983, the Debtors own and operate radio stations in the top U.S. Hispanic markets of New York City, Los Angeles, Miami, Houston, Chicago, San Francisco, Orlando, Tampa, and Puerto Rico.
• The Company also operates AIRE Radio Networks, a national radio platform; MegaTV, a network television operation distributed via over-the-air, cable, and satellite; and a portfolio of digital properties, including the LaMusica mobile app for Latino-focused audio and video streaming, and HitzMaker, a destination for aspiring new artists.
• Beyond cross-platform media distribution, the Debtors produce a nationwide roster of live concerts and events and provide digital marketing solutions through DigIdea, a pure-play digital marketing department.

Revenue Profile

The Debtors' revenue is primarily derived from the sale of advertising airtime to local, national, and network advertisers, supplemented by digital, special events, and ancillary income streams.

• Local Revenue: Generated through advertising airtime sold to local advertisers, including local spot sales, integrated sales, sponsorship sales, and paid programming (or infomercials).
• National Revenue: Generally facilitated by an outside national representation firm acting as an agent in transactions with agencies purchasing advertising across multiple markets.
• Network Revenue: Consists of advertising airtime sold on the AIRE Radio Networks platform by the Debtors' network sales staff.
• Digital Revenue: Comprised of advertisements placed on the LaMusica application or the Debtors' digitally streamed stations.
• Special Events Revenue: Generated from concerts and other live events through ticket sales and licensing agreements.
• Ancillary Revenue: Includes rental income from tower space and subchannel leases, subscriber revenue from cable and satellite providers, and other non-broadcast income. The Debtors also use barter sales agreements to reduce cash paid for operating costs and expenses by exchanging advertising airtime for goods or services.

Revenue is generally a function of advertising rates and the number of advertisements that can be broadcast without jeopardizing listenership or viewership levels. Each station broadcasts a predetermined number of advertisements per hour designed to maximize revenue without negatively impacting audience size, and the total annual ad load on a particular station typically does not vary significantly from year to year.

• Historically, advertisement revenue increases meaningfully during contested election seasons due to heightened demand for political advertisements, as radio remains the leading audio platform for Hispanic consumers and a favored medium for political outreach.

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Corporate History

SBS was founded in 1983 and reincorporated in Delaware in 1994. In 1999, the Company completed one of the largest initial public offerings in radio history.

Expansion Through Acquisition

• Throughout the 1980s and 1990s, SBS expanded its influence across South Florida and the contiguous United States by acquiring radio stations in major U.S. cities, including New York City, Los Angeles, Chicago, San Francisco, Dallas, and San Antonio.
• In the early 2000s, SBS completed the consolidation of the largest radio group in Puerto Rico and opened a broadcast complex on the island.
• SBS continued to acquire, and occasionally divest, radio stations throughout the 2000s.

Diversification Beyond Radio

• In 2006, SBS launched MegaTV in the contiguous United States, which won five Emmy awards during its first year of operations. MegaTV expanded to Puerto Rico in 2008.
• During the 2010s, SBS established and grew the AIRE affiliate radio network, launched the LaMusica.com website, and rolled out the LaMusica and HitzMaker mobile applications.
• In 2019, SBS's Mega 97.9 station in New York City was declared the most-listened-to Hispanic radio station in the world.

SEC Deregistration

• SBS was required to file periodic reports with the SEC until 2020, when it filed a Certification and Notice of Termination of Registration under Section 12(g) of the Securities Exchange Act of 1934, terminating the registration of its securities and suspending its obligation to file periodic reports under Sections 13 and 15(d).

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Operations Overview

The Debtors operate across four complementary business lines—Radio, Television, Internet and Digital Content, and Live Concerts and Events—anchored by a national footprint in the largest U.S. Hispanic markets.

Radio Business

• The Debtors operate 17 radio stations and own three of the top six Spanish-language stations in the United States, including WSKQ, the number-one ranked U.S. station in New York City based on the average number of listeners per quarter-hour.
• The Debtors' owned and operated stations have a strong foothold in the top U.S. Hispanic markets of Los Angeles, New York, Miami, Houston, Chicago, San Francisco, Orlando, Tampa, and Puerto Rico. The Los Angeles and New York markets host the largest and second-largest Hispanic populations and are also the largest and second-largest U.S. radio markets measured by advertising revenue, respectively.
• The Debtors also operate AIRE Radio Networks, which has over 250 U.S. Spanish-language affiliate radio stations serving 79 U.S. Hispanic markets, covering 94% of the U.S. Hispanic market and reaching 21 million listeners monthly.
• Because the U.S. Hispanic population is diverse—comprising numerous ethnic groups with distinct musical, cultural, and linguistic traditions—the Debtors customize the programming format of each station to reflect local musical tastes and capture a substantial share of the target demographic in each market.

Television Business

• The Debtors' television stations and related affiliates operate under the "MegaTV" brand, broadcasting via owned and operated stations in South Florida and through programming and distribution agreements, including nationally on a subscriber basis.
• MegaTV's format emphasizes entertainment, current events, and variety, leveraging the Debtors' core strengths as an entertainment company to offer an alternative to traditional Hispanic television channels.
• Programming spans televised radio-branded shows and general entertainment formats such as music, celebrity news, debate, interviews, and personality-driven shows. As part of a broader cross-platform strategy, on-air radio personalities are integrated into the Debtors' television programming.

Internet and Digital Content Business

• The Debtors operate multiple Spanish and bilingual websites, including www.lamusica.com, that deliver content related to Latin music, entertainment, news, and culture, alongside the LaMusica mobile application and HitzMaker.
• The LaMusica app is a music and entertainment audio and video platform offering an extensive library of short-form videos, simultaneous live streams of the Debtors' radio stations, curated playlists, and personalization tools that enhance audience engagement and extend the reach of the Debtors' mobile offering.
• Through DigIdea, the Debtors' pure-play digital marketing department, brands access a diverse range of engaging content, unlock audience insights, and connect with the podcast community.

Live Concerts and Events Business

• Through the SBS Entertainment business, the Debtors typically produce over 40 live concerts, events, and live activations annually across the contiguous United States and Puerto Rico, attracting more than 130,000 attendees.
• Marquee events such as CaliBash, Cubatonazo, MegaBash, MiamiBash, and Mega Mezcla are typically sold out annually.
• Concerts generate revenue from ticket sales, sponsorship and promotions, licensing fees, and profit-sharing arrangements for events produced or co-produced with the Debtors' radio stations and digital properties.
• These events also build brand awareness in surrounding communities, providing the Debtors' advertising partners with additional opportunities to reach target audiences.

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Prepetition Obligations

As of the Petition Date, the Debtors' capital structure consists of $310 million in aggregate principal amount of outstanding secured funded-debt obligations under the Existing Notes, together with approximately $15 million in unpaid trade payables and other ordinary course obligations. SBS's prepetition capital structure is summarized below:

9.75% Senior Secured Notes due 2026

• On February 17, 2021, SBS completed a private offering of $310 million in aggregate principal amount of 9.75% Senior Secured Notes due 2026 (the "Existing Notes").
  • Interest accrues at 9.75% per annum and is payable semi-annually in arrears on March 1 and September 1, with payments commencing on September 1, 2021.
  • The Existing Notes matured on March 1, 2026. On March 6, 2026, the Debtors entered into a Forbearance Agreement with certain holders of the Existing Notes to address the maturity.
  • As of the close of business on March 6, 2026, the Debtors were unconditionally indebted to the holders of the Existing Notes in an aggregate principal amount of not less than $310 million, plus accrued and unpaid interest (including interest on overdue interest and principal) of not less than approximately $15.55 million, together with all fees, costs, expenses, premiums, make-wholes, and other charges payable under the Existing Notes Documents.

Revolver Facility (Terminated)

• Concurrently with the Existing Notes offering on February 17, 2021, SBS entered into a senior secured asset-based revolving credit facility (the "Revolver") providing for borrowings of up to $15 million, subject to compliance with a borrowing base.
  • Obligations under the Revolver were secured by (i) a first-priority lien on all accounts receivable, cash, deposit accounts, and related proceeds held by SBS and the guarantors, and (ii) a first lien, pari passu with the Existing Notes, on substantially all other assets held by SBS and its Debtor affiliate guarantors.
  • On October 20, 2025, ahead of the facility's October 27, 2025 maturity date, SBS prepaid the outstanding balance in full and terminated the Revolver.

Trade Obligations

• As of the Petition Date, the Debtors estimate approximately $15 million in unpaid trade payables.

Capital Ownership Structure

• As of September 30, 2025, SBS's outstanding equity consisted of the following classes of stock:
  • Series C Preferred Stock: 380,000 shares outstanding, all beneficially owned by Raúl Alarcón, Jr., the Chairman of the Board and Chief Executive Officer. The Series C preferred stock is convertible into 760,000 shares of Class A common stock, subject to certain adjustments.
  • Class B Common Stock: 2,340,353 shares outstanding, each carrying ten votes per share. Raúl Alarcón, Jr. holds voting control over all but 350 of these shares. The Class B common stock is convertible into Class A common stock on a share-for-share basis.
  • Class A Common Stock: 6,223,374 shares outstanding.
• SBS had approximately 81 record holders of Class A common stock, three record holders of Class B common stock, and one record holder of Series C preferred stock, excluding beneficial holders whose shares may be held through brokerage firms and clearing agencies.
• There is no established public trading market for SBS's Class B common stock or Series C preferred stock. Each share of Series C preferred stock is convertible into two shares of Class A common stock.

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Events Leading to Bankruptcy

Macroeconomic and Industry Trends

• SBS, which derives the majority of its revenue from on-air advertisements across its U.S. radio station portfolio, faced a fundamental shift in audio consumption patterns that eroded its core business:
  • The rapid rise of on-demand streaming and podcasting drew audiences—particularly younger listeners—away from linear radio and across multiple digital ecosystems.
  • Local and national advertisers followed audience migration, diminishing radio’s standing as a primary advertising channel and constraining top-line growth.
  • Expanding multi-platform ad campaigns elevated baseline technology requirements, driving up operational costs across radio, television, and digital media, while music licensing and entertainment talent costs also climbed.
  • A prolonged period of high leverage and constrained capital markets access limited SBS’s ability to invest meaningfully in the growing digital and internet segments.

Political Advertising Headwinds

• SBS historically generates meaningful revenue from political advertising during midterm and presidential election cycles. However, because its major markets—New York, Florida, California, and Illinois—have not been considered swing states in recent cycles, political ad revenue has steadily declined, though the Company remains hopeful that the 2026 midterm election will drive a rebound in spending.

Disruptions in the Los Angeles Market

• Los Angeles, one of the largest U.S. Hispanic markets, weighed heavily on 2025 operating results. The Company experienced a decline in overall broadcast advertising and recognized increased non-cash impairment charges due to uncertain market conditions and the January 2025 wildfires that disrupted the region.

Prepetition Restructuring Efforts and Advisor Engagement

• In October 2025, the Debtors began a focused review of their capital structure to address the approaching maturity of the Existing Notes, retaining Fried, Frank, Harris, Shriver & Jacobson LLP as legal counsel and GLC Investment Advisors, LLC as investment banker and financial advisor.
  • Over the ensuing months, the Debtors engaged in restructuring discussions with an ad hoc committee of holders of the Existing Notes (the “Ad Hoc Committee”), represented by Milbank LLP and M3 Advisory Partners, LP.

Existing Notes Maturity and Forbearance Agreement

• The Existing Notes matured on March 1, 2026, and the Debtors were unable to satisfy the $310 million principal amount and accrued unpaid interest at maturity.
  • On March 6, 2026, the Debtors entered into a 30-day forbearance agreement with the Ad Hoc Committee to address the maturity default and stabilize the Company’s financial footing.
  • Shortly thereafter, the Debtors appointed Carney Hawks as an independent, disinterested director across all Debtor entity boards, while negotiations with the Ad Hoc Committee on a consensual, arm’s-length restructuring continued.

Restructuring Support Agreement

• On April 3, 2026, the Debtors entered into the Restructuring Support Agreement with holders of more than 90% of their funded indebtedness—including Brigade Capital Management, Bardin Hill Investment Partners, and Bayside Capital as backstop parties—contemplating an in-court restructuring through a prepackaged chapter 11 plan funded by a debtor-in-possession financing facility provided by the Ad Hoc Committee.
  • In parallel, the Debtors retained Morris, Nichols, Arsht & Tunnell LLP as Delaware local counsel and Riveron RTS, LLC as financial advisor, with Riveron Management Services, LLC subsequently engaged to provide Chief Restructuring Officer services.
  • The Restructuring Support Agreement provides for a comprehensive balance sheet restructuring designed to reduce funded indebtedness from $310 million to $70 million—a reduction of more than three-quarters—while leaving customers, audiences, programming, vendors, and trade creditors unimpaired.

DIP Financing and Path Forward

• To bridge operations through confirmation and FCC approval, the Debtors obtained a commitment for a $30 million term loan debtor-in-possession financing facility (comprised of a $20 million base commitment and a $10 million accordion drawable upon Backstop Party consent or the occurrence of a Sale Pivot Date), backstopped by certain holders of Existing Notes, with all such holders entitled to participate on a pro rata basis subject to compliance with the Restructuring Support Agreement.
  • GLC conducted a market process for alternative DIP financing, and no party was willing to provide superior terms. The facility, combined with use of cash collateral, was sized against an Approved Budget covering the initial 13 weeks of the cases and longer-term monthly forecasts.
• The prepackaged Plan, solicited on a "straddle" basis beginning the morning of May 11, 2026 by Kroll Restructuring Administration LLC, will cancel the Existing Notes in exchange for New Secured Notes and New Common Stock issued by Reorganized SBS (with the Existing Indenture remaining in effect), leave General Unsecured Claims and other priority claims unimpaired and paid in full, cancel existing preferred and common equity for no consideration, effect a Transfer of Control of the Debtors' FCC licenses, and vest all estate property in the Reorganized Debtors free and clear of liens, claims, and encumbrances (subject to the potential sale of certain non-core assets).
  • The Restructuring Support Agreement contemplates an accelerated timeline, including entry of a combined Disclosure Statement and Confirmation Order no later than 55 days after the Petition Date, with the Plan Effective Date occurring no later than 180 days after confirmation—an intentionally extended window to accommodate FCC approval of the change of control.