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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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