District votes on sale to KOCE Foundation

Marisa O’Neil

In its bid to buy KOCE-TV, the station’s foundation removed a clause

from the purchase contract with the Coast Community College District

on Saturday in an effort to ensure a positive vote from trustees on

Wednesday night.

The result of Wednesday night’s vote was not available before

press time.

The now defunct clause called for the district to sign off on a

subordinate, or secondary, loan for the foundation to secure

financing. Under such a deal, if the foundation defaulted on its

loan, the bank would have first claim to the station’s assets,

including its broadcast license. The district would get whatever, if

anything, was left.

And that would “absolutely” be a deal-breaker, board trustee

George Brown said.

Milford W. Dahl, the attorney representing the Coast Community

College District, which owns the public broadcasting station KOCE,

said he received news that the foundation would drop that

“subordination clause” in the purchase agreement.

If the clause was not dropped, Brown said, he “can’t imagine” that

the board would agree to it.

“If that happens, I’d suspect we’d make the decision to keep

[KOCE-TV] for a while,” he said.

KOCE-TV Foundation President Bob Brown, no relation, has said that

the district knew all along that the foundation would have to borrow

money for the $8-million down payment. George Brown, however, said

that subordinating the loan was a new development.

“Legally, I think it’s as good a document as we can get,” Dahl

said of the proposed agreement. “It comes down to whether or not the

district wants to do the subordination.”

UC Irvine finance professor Neal Stoughton said that the practice

of subordinating a loan was not uncommon. Junk bonds, he said, are a

type of subordinated loan. Their main drawback is the increased risk.

The new language would require the board to find a loan without

having the district sign off on a secondary loan as a default option,

Dahl said. The foundation previously contended it could not secure

the loan for the $8-million down payment unless the district agreed

to sign, but has obviously changed its tune.

“They think they can get one without it,” Dahl said.

That clause was just one more glitch in a lengthy process --

complete with public protests, spirited debates, number crunching,

multimillion-dollar bids, missed deadlines and lawsuits -- to keep

the station a part of the Public Broadcasting System and lessen the

college district’s financial burdens.

“We’ve been trying to figure out how to make it available to the

foundation,” George Brown said. “Now, they have fiddled with it, and

it looks like they are still the highest bidder.”

In August, the Coast College District announced it would sell KOCE

and received a number of generous offers from various interests,

including several religious broadcasters. Daystar, the nation’s

largest Christian Broadcaster, offered $25.1 million in cash.

The KOCE-TV Foundation, which tapped high-powered executives such

as Broadcom Chairman Henry Samueli and former baseball commissioner

Peter Ueberroth, made a bid of $32 million -- $8 million cash and $24

million on a long-term note.

The agreement also solidifies a programming agreement in which the

foundation agrees to provide the district with 40 hours of airtime to

broadcast its telecourses and 600 minutes of promotional time for the

district’s three colleges in exchange for $2.5 million worth of the

promissory note, according to the contract.

The station must also bring in 10% more than it spends on

operation, documents state.