Air America files for Chapter 11

October 16, 2006|By New York Times News Service

LOS ANGELES -- Air America Radio, the liberal talk network started two years ago in a bid to counter the influence of conservative radio personalities like Rush Limbaugh, filed for Chapter 11 bankruptcy protection Friday.

The network and its corporate parent, Piquant LLC, filed after an owner of stations that carried Air America programming took legal action to freeze its bank accounts as part of a dispute over unpaid bills. Last month, the network's backers said they would no longer provide cash to subsidize its operating losses, according to an affidavit filed by Air America in connection with the bankruptcy.

U.S. Bankruptcy Court Judge Robert Drain approved motions Friday that will let the company continue to pay salaries and remain on the air. The judge also approved a loan of $900,000 from Democracy Allies, an entity formed by current investors in the network, including Rob Glaser, chief executive of the media and entertainment company RealNetworks. Its full proposed loan of $2.6 million is to be considered at a later hearing, said Tracy Klestadt, a lawyer representing Air America.

Glaser, who has been perhaps the network's biggest champion, had no comment on the filing, a spokesman said. He is also the company's largest secured creditor and is owed $9.8 million, according to bankruptcy court filings.

Air America, whose broadcast talent includes the comedian Al Franken, has struggled financially since it went on the air in the spring of 2004. According to court papers, the company lost $8.6 million in 2004 and $19.6 million last year, and has lost $13.1 million so far in 2006.

Scott Elberg, who became the network's chief executive a week ago, said in a statement, "Nobody likes filing for bankruptcy; however, this move will enable us to concentrate on informing and entertaining our audience during the coming months."

The longtime music industry executive Danny Goldberg stepped down as chief executive in April, after serving for about a year.

The executive shuffle, which has also included the departure of the company's president and its chief operating officer in recent months, is but one sign of the turbulence that has kept Air America off balance almost from the start.

Rumors of a bankruptcy filing had surfaced last month, though the company dismissed them at the time. Friday's filing, people with knowledge of Air America's business affairs said, was prompted when a radio station owner that carried Air America programming, Multicultural Radio, restricted its accounts last month after the network failed to pay $550,000 due under a previous settlement agreement. In 2004, a few weeks after Air America went on the air, Multicultural pulled the network's programming off stations in Los Angeles and Chicago in a battle over payments for airtime, and the two sides have butted heads repeatedly since.

While the network's future appeared uncertain, industry executives were quick to deny any suggestion that the filing reflected lack of listener interest in the so-called progressive talk format. Air America says its programming is carried on 92 stations nationwide and reaches 2.4 million listeners a week.

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