Finance agency gears up; next client may be in Maryland

Originally published in Current, Aug. 20, 2001
By Steve Behrens

The second customer for pubcasting's new expansion-financing agency will probably be Maryland Public Radio, a startup nonprofit that's not only negotiating purchase of Baltimore's WJHU but also has ambitions for rapid development of a statewide network.

It's one of about 20 expansion projects working with Public Radio Capital, including several public TV stations seeking funds for digital conversion and new facilities. Additional stations may seek financing if they bid for FM licenses in an FCC auction set for December [2001].

The nonprofit financing agency, which did its first deal for Colorado Public Radio last fall, formally separated from its parent Station Resource Group on July 1 [2001]. Veteran pubcasters Susan Harmon and Bruce Theriault have joined Marc Hand as managing directors.

"I believe the appetite for growth and adding stations is really picking up," says Harmon, who secured cash for the group's startup from the Surdna Foundation.

The plan has been to sell tax-free bonds for a pool of 20 or more expansion projects, but the agency is also eyeing an alternative approach that could provide low-cost financing, according to Hand.

Steiner

Maryland Public Radio may get its long-term financing through Public Radio Capital, but expects to finance the purchase of Johns Hopkins University's WJHU largely through bank loans, with about 20 percent coming from fundraising, says Marc Steiner, president of the Maryland group and a talk-show host on the station. The group claims pledges of $762,000 so far. After taking bids from several suitors, the university went into exclusive negotiations with Maryland Public Radio in July.

To double its potential audience, the startup network aims to buy several other stations across the state within a year, according to Steiner. Anthony Brandon, Baltimore-based owner of a commercial radio group, American General Media, is advising the nonprofit as its part-time manager and a board member, Steiner said.

Expansion in public radio, as planned in Maryland, takes advantage of the same cost sharing that drives multiple-station ownership in commercial radio.

"The difference between revenue generated by the additional channels and the cost of operating them can be used to finance the cost of an acquisition," Theriault said in a press release.

The economics also favors religious radio networks like Donald Wildmon's American Family Radio, which owns 181 stations in 31 states and competes with pubradio for scarce frequencies, according to the Wall Street Journal.

With this new competition for spectrum, pubradio needed Public Radio Capital to help it move quickly when frequencies become available. Public stations were credit-worthy for borrowing money, but they didn't know it, and neither did most lenders. At the request of Public Radio Capital, the financial rating firm of Standard & Poor's looked at the public broadcasting industry and gave it a positive review, says Hand.

As potential borrowers, pubcasting is "very stable," with an attractive diversity of revenue sources and "just not a lot of risk," says Sharon Gigante, director of the municipal enterprise group at S&P. The field is "much more stable" than hospitals, with their variable revenue streams, she comments, but is naturally less stable than municipal agencies with tax income.

S&P also liked seeing CPB's role as overseer, providing a "early warning system" by requiring annual station audits, according to Hand.

Colorado Public Radio became Public Radio Capital's first customer last October, when it purchased a Denver AM station—beginning a statewide news/info network that will parallel its statewide classical-music network. The licensee now has nine stations—five purchased in the last five years, including an AM station in Boulder that it began operating July 1.

The decision to expand came when Colorado Public Radio's board resolved to have two formats, says Max Wycisk, president. When the board said "we cannot abandon news or classical music—we have to do them both and do them full time, 24 hours a day," that was the turning point, Wycisk says. "After that is a lot of hard work."

Four of the five most recent additions to Colorado Public Radio's station lineup were bought with largely with donations, but the $4.2 million Denver station was financed with bonds issued by the Colorado Educational and Cultural Facilities Authority. The authority, which assists nonprofits across the country, will issue Public Radio Capital's other bonds as well.

Hand and Theriault maintain Public Radio Capital offices in the Denver area; Harmon is based in Muncie, Ind.

Public Radio Capital's new board of directors is chaired by real estate man Peter Baldwin, former chairman of KERA-FM/TV in Dallas. Insurance executive Jan Nicholson is treasurer and secretary. Also on the board are Indiana banker Stefan S. Anderson; Seattle civic activist and former sportswear marketer Carolyn Grinstein; business magazine publisher William King, former chair of Nashville Public Radio; law school dean Leo Martinez, former chair of KQED in San Francisco; and George Sissel, chairman of Ball Corp., Broomfield, Colo. The managing directors also serve on the board.

 

	.	To Current's home page
	.	Earlier news: An offshoot of Station Resource Group, Public Radio Capital helped Colorado Public Radio buy its second Denver channel.
	.	Outside links: Public Radio Capital and Maryland Public Radio (aka Baltimore Public Radio).

Web page posted Aug. 20, 2001
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