Last December, business over at Granite Broadcasting appeared to hit, in a manner of speaking, rock-bottom. The New York-based broadcaster had filed for Chapter 11 bankruptcy protection when interest on more than $400 million in secured debt came due. Granite could not muster the funds, and bankruptcy emerged as the best option.
A year later, Granite Chairman/CEO Don Cornwell says the company, which climbed out of Chapter 11 in June when an affiliate of Silver Point Capital (and a Granite creditor) took control, will grow again. A year older and, presumably wiser, Cornwell says retransmission consent fees, more dynamic station Websites and a hyper-local focus will pace Granite in 2008. An acquisition or two might even be in the cards. “We're going to be very disciplined about how we grow the business,” he says, “but we do think there are opportunities to expand our holdings.”
Few would've expected to hear such talk a year ago. The final straw for Granite, which owns nine stations, including WEEK Peoria, Ill., and WTVH Syracuse, and manages three others, came when it attempted to sell WB outlets WDWB Detroit and KBWB San Francisco in 2005 to help pay down debt. The buyer was in place, but the deal imploded when Time Warner announced it was shutting down its WB network.
Silver Point Capital, a Greenwich, Conn.-based hedge fund specializing in distressed companies and debt, stepped in to become controlling shareholder in the reorganization plan. The company recently took Granite private. (Contacted at press time, Silver Point's principals who focus on Granite were at an off-site meeting and could not comment.)
While several appeals to that final reorganization are still pending in a U.S. District Court, Granite is moving forward with its plans.
FISCAL DISCIPLINE
Granite was “the ultimate leveraged company,” says Cornwell, that had to learn some hard lessons about fiscal responsibility. He has, however, been able to retain key managers, among them COO John Deushane, who will help guide Granite through its next stage.
After partnering with Broadcast Interactive Media (BIM), Granite completed a re-launch of its stations' Websites last summer. Company executives are excited about the sites' YouNews platform, which enables local users to submit video to be played on the sites and newscasts.
“We're hoping that YouNews begins to capture some attention,” Cornwell says. “Clearly, people like the ability to participate in the news, so to speak.”
While also looking to trim costs at the station level, Granite has been upgrading station infrastructure. Deushane notes that he saw eight times the usual Web traffic at a station site in Duluth, Minn., during a recent snowstorm. Traffic skyrocketing during extreme weather wasn't surprising; the fact that the server held up was. “In the old days, it would've shut things down,” Deushane says. “We didn't miss a beat.”
In a nod to the company's digital focus, Cornwell prefers to say Granite has 23 “channels” instead of nine stations. Its offerings on the digital tier include the Hispanic network LATV on KSEE Fresno, TV Azteca fare on KBWB San Francisco, and Retro TV Network (RTN) and Weather Plus airing elsewhere. “We've spent the money to be fully digital, and that's one way we're going to grow,” says Cornwell.
The company is particularly keen on KBWB, which recently brought in Comcast sales vet Craig Coane as president and general manager. Granite execs won't offer specifics about the station's plans, but do say its independent affiliation allows them to try something truly experimental. “There's a unique opportunity to create an interactive TV station unlike what the other folks are doing,” says Deushane, who adds that KBWB will introduce a series of new features in the next nine to 10 months.
Like just about every broadcaster in America, Granite is also looking to claim cash from cable, satellite and telco companies for retransmission consent. Cornwell says several renewals are due in 2008, and he's determined to be remunerated by the pay-TV services for the right to air Granite's station signals. “It's just business—we have content that's of value, and we think we should be able to cut business arrangements with cable operators who are also in business to make money,” he says. “It's much more of a focus for us now than the last four or five years, and it's an ongoing discussion that we'll increasingly participate in.”
SKEPTICISM AND SUPPORT
Many will view Granite's growth plans with no small degree of skepticism, given its recent history and the unknowns of a new investor group. Still, some industry insiders believe the company appears to be on solid footing.
“Whether you like or don't like Don, whether you think Granite is a great broadcaster or not, that they're reemerging speaks volumes about the viability of local TV,” says one consultant who asked not to be named. The consultant says the bankruptcy issue barely registers with viewers: “It's like someone who bought an airline ticket from United when they were in Chapter 11—the airline still carried on their business, and the fact that they'd been in Chapter 11 didn't have an enormous presence to the customer.”
Cornwell agrees. “From the point of view of advertisers and the local communities, [the Chapter 11 stigma] has never been a problem,” he says. “Viewers know us in those communities, and I think they're happy with what they see.”
Cornwell is looking at 2008 as a year of expanded reach for Granite. The ideal acquisition would be something along the lines of the WBNG Binghamton, N.Y., outlet it grabbed in 2006—a No. 1 or No. 2 news presence in its DMA. Granite will look to buy in the markets where it already has a presence (almost all Granite stations are in the Midwest and upstate New York), or else enter into service agreements with existing operators.
Their financial woes behind them, at least for now, Granite execs are simply happy to focus on the future. “We've always been a strong operation, just one that had a bad balance sheet,” says Deushane. “Frankly, it's fun to just get back to business.”
E-mail comments to michael.malone@reedbusiness.com
