Grant Broadcasting Files for Chapter 11 : Move May Affect TV Syndication, Junk Bond Markets, Analysts Say

A three-station television broadcast company headed by widely admired broadcast entrepreneur Milt Grant has sought protection under Chapter 11 of the U.S. Bankruptcy Code in a move expected to have wide effects on independent television stations and the programming syndication business.

Grant Broadcasting System, owner of non-network stations in Miami, Chicago and Philadelphia, filed for bankruptcy reorganization in Philadelphia, declaring that its current debts to programming suppliers amounted to $24 million. A filing under Chapter 11 allows a company to postpone payment of its debts while it reorganizes.

Grant Broadcasting is believed to be the largest television broadcaster ever to file for bankruptcy protection. Its financial difficulties, first disclosed by The Times two weeks ago, illustrate problems confronted by independent TV companies because of rising programming expenses, a downturn in the TV ad market and a proliferation of independent stations.

“For this to happen to a man like Milt Grant is stunning,” said Trey Hunt, vice president and a broadcast industry specialist at the Butcher & Singer investment firm in Philadelphia.

The bankruptcy petition may also deepen the woes of Drexel Burnham Lambert, the investment banking company, because Grant’s primary financing came in a private placement of $85 million of high-risk, high-yield Drexel “junk” bonds.

Drexel, and the junk-bond market that it has done much to create, is a focus of the Securities and Exchange Commission insider trading investigation that ensnared arbitrageur Ivan F. Boesky.

“For the deal to go belly up like this, only a year after it was done, and with the junk market already in turmoil, is just bad news,” said an industry source who asked to remain unidentified. “Their other bondholders must wonder what’s going on.”

The bankruptcy filing also drew predictions that other financially strapped independents may follow Grant’s example in hopes of putting off obligations to programming distributors, or syndicators. Others forecast that Grant Broadcasting’s misfortune may cause syndicators to re-evaluate the way they have sold programming, often at steep prices, to thinly financed independent stations.

“You may see a mad rush to the bankruptcy court,” said Steven Pruett, a station broker with Blackburn & Co. in Chicago. “All these other stations needed was an example, and with a man of Grant’s legendary stature, they’ve got it.”

Size a Factor

Industry sources estimate that 60 of the nation’s 220 independent stations may be up for sale and many more in financial difficulty. They say as much as $1 billion in debts to syndicators may be shaky. Most of the stations in trouble tend to be in smaller markets; stations in larger areas are generally considered to be healthy.

Scott Carlin, vice president of perennial syndication for Lorimar-Telepictures, said there was “no question” the episode will make syndicators more cautious about selling programming to independent stations. “All the major companies are already instituting much more formalized systems of credit checks,” he said. “Everyone’s going to be a lot more careful.”

Grant Broadcasting’s court papers do not provide a full list of assets and liabilities, but they show that the company expects its three stations to generate revenue between $48 million and $55 million this year.

If the $24 million in programming obligations must be paid by the end of December, as appears to be the case from the court papers, “that’s a huge chunk of revenue just for that purpose,” said Hunt of Butcher & Singer.

Pioneered Strategy

Grant is known in the industry for pioneering a strategy of bidding huge sums for programming to rapidly gain major market share with a new station. Using such an approach, he made a $176-million profit on two Texas stations in which he had invested $12 million.

Grant’s approach added to the glamour of the independent television business and is credited with drawing scores more entrpreneurs to the industry.

In a statement, Grant Broadcasting said its problem was “one of timing.” The company’s plans were prepared at a time when the TV market was at its peak, the statement said, and were disrupted by “disinflation and lower than expected advertising revenues.”

The court papers show the Grant’s largest current debts are owed to the following syndicators: Viacom International, $6.56 million; Lorimar-Telepictures, $2.58 million; Warner Bros., $1.62 million; MCA, $1.36 million; Columbia $1.01 million; MGM/UA, $954,000, and 20th Century Fox, $910,000.