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Colorado Public Radio pledge drive all about the debt

As part of its "Campaign of Confidence" and "Drive to Thrive," Colorado Public Radio is devoting much of today's programming to collecting donations. (A CPR memo published on March 20 noted that the ongoing drive and a two-day blitz on May 13 and 14 were added to the schedule due to funding shortfalls.) The goal is to raise $100,000 on Wednesday alone, with CPR personalities such as Dan Drayer and Dan Meyers emphasizing that the cash is needed to purchase the sort of programming listeners enjoy and appreciate. However, the additional on-air pitches were largely motivated by the large amount of debt CPR is currently carrying -- a situation that contributed to the recent downgrading of bonds sold to finance the service's expansion earlier this decade.

CPR vice president of programming Sean Nethery alluded to this situation in a March blog about the net's decision to shelve the expansion of the Colorado Matters program and drop plans for a new talk show. He pointed out that CPR would like to sell two AM signals, at 1340 and 1490 on the dial, made redundant by the move to FM of its classical and information signals. (They can be found at 88.1 FM and 90.1 FM, respectively.)

Unfortunately, the market for AMs is virtually nonexistent at present -- but CPR must continue simulcasting on the frequencies or else risk losing their licenses. Still, Nethery conceded last month, the expense of keeping them on the air is fairly modest compared to "the cost of paying the debt" on the outlets. "We have an extra half-million dollars of debt service every year" associated with the stations, he said back then. "And our reserves are linked to that debt. So we don't have as much flexibility."

More details appear in "Extra Debt Saps Colorado Net's Bond Rating," published last month in Current.org, which specializes in coverage of public TV and radio. The first paragraph of the report by journalist Karen Everhart reads:

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All three major bond-rating firms have now downgraded the Colorado Public Radio bonds that provided $4.7 million for the network's 2001 expansion. The reason: CPR's 2008 decision to take on the costs of an additional FM channel for its news service when listeners shunned the AM channel it had bought.

Later in the offering, Marc Hand, a managing partner in Public Radio Capital, the firm that helped finance the build-out, emphasized that these downgrades would have "no practical effect" on CPR becuase the bonds are set at a fixed rate. However, CPR would have to pay a higher rate if its debt was restructured and new bonds were issued, and that's certainly possible. After all, CPR signed an $8.4 million lease for one of the FMs last year, thereby creating what the Fitch Ratings firm refers to as "limited liquidity and increased debt burden." Later, Everhart writes that "in the $8.4 million capital lease agreement that gave CPR the use of a second FM channel in Denver, the network agreed to a loan covenant that put up a significant portion of its cash reserves as collateral, Hand said. That created the 'limited liquidity' that caused the bond-rating firms to reassess CPR's financial position."

This situation isn't likely to topple CPR; in his most recent conversation with Westword, Nethery emphasized that the operation's condition isn't "dire." Nonetheless, the majority of money collected today is likely to go toward that hefty pile of debt, not Car Talk and A Prairie Home Companion.

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