Syndicators Weigh Another 11

Bankruptcy filing one possibility for Sinclair
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Syndicators may end up with yet another customer in Chapter 11 following last week's word that Sinclair Broadcasting Group—probably the No. 4 buyer of syndicated programming behind Fox, Tribune and CBS—could file for bankruptcy protection.

Sinclair's problems are linked to those of Cunningham Broadcasting, a six-station group mostly owned by members of Sinclair CEO David Smith's family. Cunningham, with which Sinclair has local marketing agreements, is having trouble paying its bills. If Cunningham goes under, Sinclair's cash flow will be significantly affected. But last week Wells Fargo Securities analyst Marci Ryvicker said Sinclair was “posturing” in an effort to renegotiate its contracts with debt holders and was unlikely to enter Chapter 11.

Syndicators will have one more thing to worry about if Sinclair does join a club that includes Tribune, Young, Ion and Pappas; all have had to enter bankruptcy, with Young and Pappas forced to sell off their stations.

For months now, syndicators have been forced to sell their wares almost exclusively in barter-only, no-cash deals. They find themselves having to aggressively push TV stations to pay bills, wait patiently to be paid, renegotiate existing contracts or, in at least one desperate situation, sue, as CBS Television Distribution did last month when it took legal action against Global Broadcasting's WLNE Providence.

“Does this have the potential to be very impactful? Yes,” says one analyst. “Will it be more impactful than what's happened with Tribune? Probably not.”

Tribune entered Chapter 11 bankruptcy protection in December 2008. Since then, the company has worked closely with syndicators to make sure that deals work for both parties. But Tribune has remained very active in the syndication market.

Tribune's bankruptcy declaration probably improved the situation for distributors because it allowed one of syndication's biggest buyers to proceed with business as usual. As one syndication executive puts it: “There's a big difference between being bankrupt and being protected from your creditors.”

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