The Official Word re iED Change

Press Release re new appointment

And then there is this:

BILL CROSIER RE BANKRUPTCY vs LOAN

Many people have pretty set positions on the loan vs bankruptcy issue that has faced Pacifica.

The PNB has decided to go the loan route, so that's what we're doing. But I still think it's very likely we'll be in bankruptcy before the end of the year, whether people want it or not, and I do question whether Pacifica can survive, especially if our boards do not rise to the challenge. I'm determined to do whatever I can to make sure that we not only survive but also get to where we can thrive, and I assume all of you reading this want that, too. But if we keep fighting each other over this issue, in addition to our traditional factional issues, and if we don't look down the road a bit to see where we are going, then it may not be possible.  Read on to see how you can prove me wrong about bankruptcy being in our future this year.

The controversy has people crossing what used to be long-time factional lines in Pacifica. I have friends on both sides of the loan vs. bankruptcy issue. I wish everyone would listen more to each other and consider the points being made on both sides, and not demonize or blame each other. That does not help.

I strongly believe in following the advice of experts. This especially includes our attorneys and our CFO, who know more about the law and finances that probably anyone on the PNB, including me.

Our attorneys, including the two bankruptcy attorneys with whom we've consulted, told us months ago that we should avoid bankruptcy if possible, but if and when we lost the NY lawsuit and Empire State Realty Trust filed their judgment in each of our locations, that unless we had a written forbearance agreement, we should declare ch. 11. That's been my position all along. I've also been consistently against getting a loan (especially using our buildings as collateral) without a defined payment plan. Saying that we'll later decide what signal to swap or what buildings to sell is not a plan.

I realize that some of you think bankruptcy means the end of Pacifica (I don't think that, obviously), or at least that it will cost too much. But chapter 11 is really made for situations like ours, to stop collections by creditors and give us time to develop and implement a financial restructuring plan - that could continue and enhance our mission. Organizations that don't make it out of bankruptcy are generally the ones with no assets. We do have assets- substantial ones (our licenses and buildings) that are worth much more than all of our debt - but we are cash poor.

I know many of you feel all we need to do is get some loans, and we'll have plenty of time to figure out what to do. But look at where we're headed in the next few months, and do the math. It's simple, but it's not pleasant to think about. We hope to have a $2 million loan funded very soon and hope that we can use that to pay off the ESRT judgment. There's an issue ESRT brought up last week about whether that money can be used to pay the judgment or whether they might force us (under provisions in the lease) to first pay the rest of the unpaid tower lease fees that have been accumulating since May (as the judgment only covers the period up to then). With the lease going up each year, we should be paying around $65K/month this year. Perhaps we can force them to accept the loan money in payment of the lease. That's something our attorneys will have to work on. But the debt remains, either way - it's just transferred to the loan.

We also have about 3/4 million dollars that we owe to our employee retirement fund very soon, and we may be hit with a very large penalty (in addition to interest) if we don't get it paid as soon as possible.

The total of what we owe ESRT now (about $2.6 million, including the judgment & additional accumulated lease fees through Dec. 31), plus the pensions (with some interest but without including penalties) is about $3.4 million. That's what we owe now, that must be paid very soon. By the end of 2018 we'll owe about $780K more to ESRT, plus interest and penalties if we continue to not pay anything on that tower lease. Remember we've paid zero since May 2017, and were only able to pay $12K/month (for most months) for the three years before that. That's why they sued us. We should not expect that we can make the ESRT lease payments if we keep doing the same as what we've been doing.

So if we don't change things regarding our finances, by the end of 2018 we'll need at least $4.2 million to pay for the above, plus whatever penalties we may have for the pensions being so late, and whatever legal fees we'll incur when ESRT sues us again for not making those tower lease payments. And that $4.2 million does not include any loan payments at all. We can't ignore them, either, or we'll lose our buildings to foreclosure.

Note that even the bigger, second loan of 3 to 3.5 million dollars will fall short of the $4.2 million that we'll need at a minimum to get to the end of 2018, and that's in addition to all of our regular expenses. Also remember that we have about $4 million more in debt that we're not even talking about.

The loan route that the PNB has approved has some bad assumptions:

* that a $2 to 2.1 million loan with the KPFK/PRA building as collateral will let us pay off the judgment - that sounded like a good assumption until last week when ESRT told us how they had the right under the lease to apply payments first to other outstanding lease amounts. Maybe we can get around that, but we don't know.

* that we can get an acceptable $3 to 3.5 million loan this year from another friendly lender to pay off the first loan and to pay the delinquent pensions - the "acceptable" part is what I'm worried about, especially if it uses all of our buildings as collateral. The $2 million loan we looked at last fall had VERY unacceptable terms, that would have put us in default immediately and put us at the mercy of the lender - not a good place to be when we're using one of our buildings as collateral. We have seen no loan paperwork/conditions yet for the future loan we're hoping for - and we don't know if the conditions will be better. With $8M in debt and no cash flow to pay aur current bills, any lender is going to put some guarantees in any loan that they'll get their money back, so we better watch out for that.

* that the second loan will give us 3 years or more to worry about how to pay it off - As I showed above, we need at least $4.2 million more than our regular revenues, to get to the end of the year and pay what we owe to ESRT and to our employee pensions, not even counting anything for loan payment. It will be more if we have to pay penalties.

So you can see why I think we'll be in bankruptcy by the end of the year, if not sooner. Even with a $3 or 3.5 million loan, we won't have enough to make hardly any of the tower lease payments for 2018, as the loans will all get used up paying what we already owe to ESRT plus the pensions. If ESRT does not file another lawsuit against us this year, how much longer do you think they'll wait?  Our debt to them will continue to grow again, even if we get current for a short time via the loans. And the monthly payments that we can't afford get bigger each year. Even if we can find a loan that requires zero payments until the end (unlikely), we'll owe hundreds of thousands more to ESRT by the end of the year. 

Without enough money to keep making Empire State Bldg tower lease payments, ESRT will sue us again before the end of 2018 and win again, and we'll be in even worse shape then with more debt, and with loans using possibly all of our buildings as collateral. 

Here's how you can prove me wrong about bankruptcy. We must increase revenues substantially, and reduce expenses wherever we can. A little bit won't be enough. We need to generate a surplus THIS YEAR of at least $1 million, and do even better next year, and the year after that.  We will need that so we can pay the increasing ESRT tower lease payments through June of 2020, and to be able to make loan payments so we don't lose our buildings. We also need to make sure that ALL stations pay their Central Services dues EVERY MONTH to the National Office, so they don't continue to be so starved for cash that they can't hire enough people to do the work - that's why our audits are late, why we have minimal HR support, why our pensions are not funded, and why our debt has been increasing.

This is going to require some changes. No, not in the mission, but in how some of our stations operate, because we have to be able to pay our bills if we want Pacifica and our mission to survive.

Our LSBs and PNB need to stop micro-managing, and especially should not insist on keeping programs that listeners don't want and will not pay for, no matter how much you personally might like a show. We can make exceptions at times of the day when most people don't listen to radio. But we must have enough good, quality programs that are consistent with our mission and which listeners will support, to bring in enough money to pay our bills and keep Pacifica operating.

Arguing with, and blaming each other, and having weekly (or more frequent) 3-5 hour PNB meetings that accomplish almost nothing is not going to help. The failure of our boards is scaring away major donors and even small ones. 

I know that those of you who've been pushing for loans believe that's best for Pacifica. I hope you will realize that there are are also those of us who believe it's a band-aid approach that will give us a few months at best, and make matters worse later, and that bankrupcy is best for Pacifica. 

Is it possible for us to agree to disagree, at least for a while, so we can work together on how to solve the above problems? We have to stop fighting with and blaming each other, so much so we can decide how we're going to increase revenue and cut expenses. If we don't make changes to accomplish this, there won't be anything left to fight about much longer.

Bill Crosier

outgoing interim Executive Director