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NAB: COVID-Hit Stations Face Need for Converting Foreign Debt Into Equity

(Image credit: Future Media)

Broadcasters are telling the FCC that the pandemic makes it that much more important to streamline reviews of foreign ownership in broadcast properties, in part because pandemic-hammered stations may need to convert foreign debt into equity to avoid defaulting on the loans.

President Donald Trump issued an executive order April 4 establishing the Committee for the Assessment of Foreign Participation in the United States Telecommunications Services Sector.

The committee's aim is to help keep the telecommunications sector secure from foreign threats to national security, including by recommending the FCC deny licenses or revoke existing licenses if necessary. The new committee is chaired by Attorney General William Barr and funded by the Department of Justice.

The FCC sought comment on process reforms the FCC should undertake as part of its own rulemaking on reforming the foreign ownership review process, which is conducted by both the FCC and Executive Branch agencies. The FCC has lifted the 25% cap on foreign ownership in broadcast properties, instead looking at such ownership on a case-by-case basis.

In comments to the FCC, the National Association of Broadcasters said it supports a "more streamlined, time-limited and transparent process," and cited the economic hit of the pandemic as a reason broadcasters may be seeking more reviews of foreign ownership.

"The need to streamline the Executive Branch review process has become more
pressing in light of the unprecedented economic challenges brought on by the COVID-19 pandemic, as a substantial portion of broadcasters’ advertising revenue has declined as a result," NAB told the commission.

"Many of the local businesses who generally partner with broadcasters have ceased operations (at least temporarily) and have lost significant business due to COVID-19. Facing financial straits, they have been forced to slash their advertising budgets. As a result, even while many Americans are tuning in to local stations in record numbers to stay informed and entertained, stations are experiencing record lows in terms of advertising revenues, forcing stations to lay off or furlough employees, reduce salaries or even go silent.

"In this environment, some broadcasters have found themselves needing to convert debt securities, which may be held by entities considered foreign under the FCC”s rules, into equity in order to avoid defaulting on their loans or otherwise adjust their capital structures. A streamlined Executive Branch review process will help broadcasters obtain the necessary approvals to maintain or secure investment during these unprecedented financial challenges without the
burden of unnecessary transaction costs and delays."