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Paxson's Burgess: $40M Man?

The NBC Universal executive taking the helm of Paxson Communications has plenty of incentive to turn the ailing broadcaster around: a pay package that could easily be worth $40 million.

Securities filings show that Brandon Burgess, previously executive VP of business development for NBC U, will collect an annual salary of $1 million, plus a bonus—if awarded—of no less than $1 million. He also got a one-time $1.5 million signing bonus.

But the real riches lie in a lucrative stock-and-option compensation package covering 24 million Paxson common shares. With the ailing company trading as a penny stock in recent months, the package tremendously amplifies even a modest improvement in the company’s price. A swing from $1 to $2 per share—a benchmark set by NBC U—would make Burgess’ four-year deal worth $44.1 million.

That could be worth it to everyone if Burgess can avert the financial crisis looming at Paxson. The company is struggling under a $2 billion debt load and cannot handle a substantial increase in interest costs due to kick in next year. At the same time, its family-friendly Pax TV strategy has collapsed and converted to iNet, mostly pumping infomercials through its portfolio of stations.

Installing Burgess is part of NBC U’s plan to rescue its $600 million investment in the company. NBC owns preferred stock convertible into 32% of Paxson shares at $2 each. However, FCC station-ownership rules prevent NBC U from exercising too much control. With investment banker Lazard Freres negotiating on behalf of a committee of independent shareholders, NBC agreed to restructure its investment, giving up $100 million in dividends owed by Paxson and starting the company on the road to a bigger restructuring.

The central question is how to program Paxson. The company’s stations reach 90 million homes, and digital broadcasting may provide another five channels.

Burgess is first looking for a sizeable strategic partner who wants to flex its programming muscle but not take on the risk of buying the company outright. He says, “I think people have figured out that launching digital [cable] networks is harder than expected.”