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WSJ, Jan. 2 2017
Radio Broadcaster Pacifica Teeters on Edge of Bankruptcy
By Becky Yerak
Pacifica Foundation Inc. might be edging toward bankruptcy as the
nonprofit radio broadcaster struggles to pay a $1.8 million judgment
over missed lease payments for its Empire State Building antenna.
Bill Crosier, Pacifica’s interim executive director, is urging the
foundation’s board to act immediately to protect the foundation’s assets
from creditors through a voluntary chapter 11 filing. A “small majority”
of Pacifica directors, however, are holding out hope that the foundation
can arrange a loan outside of bankruptcy court to pay the judgment, he
said Monday. Mr. Crosier told the board in an email last Wednesday that
chapter 11 is the best way to protect the foundation’s assets from
creditors and allow it to continue to operate.
Pacifica owns five radio stations: WBAI in New York; KPFA in Berkeley,
Calif.; KPFK in Los Angeles; KPFT in Houston; and WPFW in Washington,
D.C. Nearly 300 affiliates carry some Pacifica programming, Mr. Crosier
said Friday.
Pacifica’s finances have been mismanaged for years, according to a
resolution that Mr. Crosier sent to the board last week with the email
encouraging it to approve a bankruptcy filing. Since 2015, Pacifica has
failed to fund its employee retirement plan, to which it now owes
$750,000, the resolution said. The Wall Street Journal reviewed the
email and the resolution.
Pacifica’s precarious financial condition stems in part from a recent
ruling against the Berkeley, Calif.-based nonprofit in a lawsuit brought
by ESRT Empire State Building LLC over WBAI’s failure to make lease
payments for its broadcast antenna on the Empire State Building in New
York City. The New York State Supreme Court judgment awarded $1.8
million in damages to ESRT, a real-estate investment trust with a
portfolio of office and retail properties. ESRT is listed on the New
York Stock Exchange.
“We have exhausted all options at this time to secure a loan or to pay
the ESRT judgment or to secure a forbearance agreement,” Mr. Crosier
said in the email to the board. Pacifica’s assets, including bank
accounts, are in “imminent danger” of being seized or subject to a lien,
he added in the email.
A lien has already been put on the building owned by Pacifica’s Texas
radio station, and a lien could soon be put on a California property,
Mr. Crosier told WSJ Bankruptcy Pro on Friday.
It is unlikely, however, that the stations will be shut down, Mr.
Crosier said.
Pacifica’s national board met Thursday night, but postponed discussion
of a bankruptcy filing until this week.
A small majority of board members disagree with Mr. Crosier’s
recommendation and oppose filing for bankruptcy because they believe
that ESRT won’t move to seize assets immediately as long as Pacifica
shows it is actively looking for a loan to pay the judgment, he said
Friday. The foundation’s loan broker has talked to ESRT lawyers and
believes that the landlord will give it time to find financing. “I hope
they’re right,” Mr. Crosier said.
While some board members hold out hope for getting financing, Mr.
Crosier remains concerned about the prospects for obtaining a loan on
reasonable terms unless Pacifica makes changes to its operations. In or
out of bankruptcy, he said, Pacifica’s shaky finances will likely force
it to do a signal swap, in which another operator gets a chance to trade
licenses with Pacifica in exchange for paying the foundation for a
bigger coverage area.
Sabrina Jacobs, foundation board vice chair, agrees with Mr. Crosier
that a bankruptcy filing should be sought as soon as possible. “Time is
running out,” said Ms. Jacobs, who is also a KPFA producer and host of
“A Rude Awakening,” a community-affairs program on the station. “We owe
money, and we need to pay the money.”
Appearing on “A Rude Awakening” on New Year’s Day, Mr. Crosier told
listeners that Pacifica has about $8 million in debt.
But Pacifica board member Grace Aaron, of KPFK, said it makes more sense
to get a loan to pay the judgment. The foundation estimates that its
assets, namely its broadcast licenses, could be valued at $100 million.
Ms. Aaron said WBAI, for example, has a spot on the commercial spectrum
that could be a hot property that, if sold or swapped, could help
Pacifica pay off its debt, but “we’d lose a treasured asset” and end up
with a “degraded signal.” She added that bankruptcy is a costly process
and that she is skeptical Pacifica would be able to reduce its debt in
bankruptcy.
For the year ended Sept. 30, 2016, Pacifica had revenue of $10,009,195
and expenses of $10,785,454, according to a filing with the Internal
Revenue Service.
Write to Becky Yerak at becky.ye...@wsj.com
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