PIE Releases White Paper on Sheridan Fight with GCP

RADIO ONLINE | Tuesday, December 11, 2018 | 9:19pm CT

Partnership for Innovation and Empowerment

The Partnership for Innovation and Empowerment (PIE) has released a white paper on the details of Sheridan Broadcasting's fight with Guggenheim Capital Partners over American Urban Radio Networks (AURN). Entitled "Guggenheim Killed Black News: How a $250 Billion Dollar Hedge Fund Silenced the Last Black Owned Independent Media Network," the paper was created and written by Sheridan COO Ronald Davenport, Jr. and PIE Advisory Committee member and President of Sheridan Broadcasting Leroy Jones Jr. The paper details what it calls "the brutal and ruthless fight to control AURN."

"I will be formally requesting the appropriate Congressional Committees with oversight of venture capitalists, hedge funds, media companies and their practices to both investigate and hold hearings on the actions of these well-funded companies that have quietly silenced the voices of both our community and other vulnerable communities of color one by one," said Leroy Jones, Jr.

In the white paper, Sheridan details how actions taken by an over-zealous former partner resulted in the company discontinuing its network operations in 2017 and the sale of all but one of its radio stations. Sheridan's network operations represented the last African-American-owned network radio operations in the U.S. The company currently only owns WIGO-AM in Atlanta.

American Urban Radio Networks (AURN) was formed as a partnership in 1991 between two competing networks: Sheridan Broadcasting Networks (SBN) and National Black Network (NBN). SBN (owned by Sheridan) owned 51% and NBN (owned by Unity Broadcasting, which subsequently changed its name to Access.1) owned the remaining 49%. The bulk of AURN's programming was supplied by SBN and Sheridan.

Access.1 borrowed over $96 million from Guggenheim Capital Partners (a $250 billion hedge fund) between 2004 and 2006 and used the proceeds to purchase radio stations. By 2007, Access.1 was in technical default under the terms of the loans. In January, 2008, Guggenheim declared Access.1 to be in default to the tune of $106 million (including penalties and interest). After a legal battle and protracted settlement negotiations, Guggenheim foreclosed on Access.1's assets in February, 2013 and took a majority share of Access.1's stock.

In 2008, Access.1 began liquidating assets to repay Guggenheim. The company had purchased 18 radio stations and one TV station between 2000 and 2005. In 2008, Access.1 sold 5 radio stations for almost one half of what it acquired them for. In 2013, Access.1 sold its TV station for 75% of what it purchased it for. In 2014, the company sold 9 stations for less than what it purchased them for.

Guggenheim/NBN then tried to liquidate NBN's 49% interest in AURN. Sheridan says it made several attempts to purchase NBN's 49% interest in AURN to no avail. Rather than sell to Sheridan, the white paper says Guggenheim instead chose to starve Sheridan. The ensuing battle with the deep pockets of the hedge fund ultimately led to a years' long battle and chapter 11 bankruptcy which led to the loss of AURN. The network has been on the market since 2008.

Sheridan says "the result was not necessary and occurred not because of Sheridan's hubris or anything that Sheridan did, but because Access.1 (NBN's parent) borrowed too much and was only able to pay back one third of the amount due, leaving Guggenheim $70 million short. Guggenheim foreclosed on Access.1 and took a controlling interest in Access.1 and, knowing that Sheridan was the only party interested in buying NBN's 49% interest, took steps to weaken Sheridan with protracted litigation to force Sheridan to pay an exorbitant price."

Read the complete white paper by clicking here.