TV Producers Ask for Right to Run 3 Struggling Stations

NEW YORK —  Television program distributors that are the largest creditors of Grant Broadcasting System may seek a court’s permission to operate the three stations owned by the broadcaster while it is under protection of the U.S. Bankruptcy Code, sources said Tuesday.

Many of the creditors believe that only by such an unprecedented step could the distributors recoup much of the roughly $200 million they are owed by Grant Broadcasting, which owns non-network stations WGBO in Chicago, WGBS in Philadelphia and WBFS in Miami. “If things continue as they are now, we may not get 10 cents on the dollar,” said one source close to the creditors, who include most of the major Hollywood studios.

Since Grant Broadcasting filed for protection under Chapter 11 of the bankruptcy code on Dec. 9, its travails have become a symbol of financial pressures facing many of the nation’s 260 commercial non-network television stations. These stations have paid heavily for syndicated programming, but many have strained to produce profits in the past 18 months as competition has increased and the advertising market has softened.

While few television stations have ever gone bankrupt, some industry officials believe that Grant Broadcasting’s bankruptcy filing may presage similar moves by other troubled non-network, or “independent” broadcasters. If the court were to agree to the syndicators’ tentative plan, “it would be another unprecedented action in a case that’s full of precedents,” said Trey Hunt, an investment banker and broadcast industry specialist with Butcher & Singer in Philadelphia.

And if the syndicators run one financially troubled station, “pretty soon they might find themselves running a whole flock of them,” Hunt said.

In seeking bankruptcy protection, Grant Broadcasting listed short-term debts of $24 million owed to programmers Viacom International, Lorimar-Telepictures, Warner Brothers, MCA, the Columbia Pictures unit of Coca-Cola, MGM-UA and Fox Broadcasting. Under multi-year contracts to provide programming, however, its obligations to syndicators total about $200 million. Holders of high-yield “junk” bonds issued by Grant and underwritten last year by the Drexel Burnham Lambert investment bank are owed another $85 million.

Milton Grant, the broadcasting firm’s chief executive, is given 120 days from the date of the bankruptcy filing to propose his own plan to reorganize and pay off creditors. But sources said the syndicators have met several times to develop a strategy on how to deal with the broadcaster’s bankruptcy, and are in general agreement that they will propose taking control.

Under their tentative plan, one of the syndicators might be chosen to run the operation, with approval of the remainder. But the syndicators have also not agreed on which firm would take the lead role, sources said.

Supporters of the idea believe that it might ultimately allow the creditors to be paid as much as half of what they are owed by Grant, which has not paid any syndicator since July.

Meanwhile, Grant and the creditors face a delicate problem in retaining advertiser confidence as they seek to turn the company around. One threat is that advertisers will be panicked if they see the Grant stations are no longer carrying their scheduled programming.

Viacom and Embassy cut off Grant Broadcasting shortly after the company fell into arrears, according to sources. “The danger here is that confidence will erode, and you’ll have a spiraling effect,” Hunt said.

Attorneys representing Grant did not return repeated telephone calls. Executives of the principal distributors owed money by Grant either declined comment or could not be reached Tuesday.