Interesting Outsider’s Take on the KFUO Sale

(This comment was placed this morning on Mollie’s KFUO story  from October 17. It is written by Sam Glasser.)
November 18th, 2009 at 23:46 | #27
I’ve enjoyed this site’s coverage of the proposed “sale” of KFUO-FM to Gateway Creative Broadcasting, Inc. (aka “JOY-FM”) as there are some very sharp-minded contributors on board.

Although not a Lutheran, I grew up the son of a devout Christian missionary to China who went on to service in several ecumenical settings, becoming, prior to retirement, Dean Emeritus of Fuller Theological Seminary in Pasadena. Although not a regularly practicing Christian myself, I am therefore somewhat familiar with religious settings. I am a retired businessman and, unfortunately, familiar with the likes of Kermit Brashear. I am also a passionate lover of classical music, which prompts this post.

I thought you might enjoy my “take” on the situation for it is my opinion that Kermit Brashear has snookered the Lutheran Church-Missouri Synod in the “sale” of KFUO-FM. It is my guess that, in “executive (i.e., secret) session” at the LCMS Board Meeting last February 2009, Kermit persuaded Tom Kuchta and his fellow Board members to let him find a purchaser of KFUO-FM in exchange for a fee equal to a percentage of the purchase price he obtained. Like a real estate agent, Brashear’s fee depends solely on the total purchase price payable – in this case $18M – regardless of how much of the price is ever paid to the Lutheran Church. And like a real estate agent, his fee would be payable at closing, again regardless of whether another nickel (on account of the $16.5M Note) is ever paid to the Church. This “deal” has the earmarks of Kermit Brashear all over it. Google this character and you will soon see how it is in keeping with his “MO” and reminiscent of other “deals” he has engineered (read, for example, about “Sarpy County” Nebraska’s baseball team….).

Let’s say I’m right and Brashear is getting a fee of, say, 6% of the purchase price Gateway (JOY-FM) has agreed to “try to” pay. Assuming there is a closing, Brashear would be entitled to a fee of $1,080,000 (6% x $18,000,000) payable at closing. Interestingly, a review of the Purchase Agreement between the LCMS and Gateway (JOY-FM) shows that at closing, Gateway is required to pay $1,500,000 cash – more than enough to pay Brashear’s fee plus his firm’s legal fees – but little more. Under the Agreement, Gateway is not required to pay another nickel until the end of the 24th month following closing when it is obligated to pay an additional $1,500,000 in principal and interest at 5.25% on the unpaid balance ($16.5M) for the second year’s interest (with the first year’s interest being deferred for 10 years!). Obviously, Brashear personally could care less whether or not Gateway (JOY-FM) ever pays a penny after closing; his fees will have been paid in full and back to Nebraska he goes, smiling all the way.

Why, you might ask, would Gateway ever agree to pay the astronomical high price of $18M for KUFO-FM when it is worth by any professional estimation approximately $8-9M in a straightforward, cash-based transaction? The answer is because Gateway has nothing to lose and everything to gain. {Parenthetically, JOY-FM doesn’t have a “dime” ($200K on hand as of May 31, 2009), has lost money for the last 2 years on annual revenue of $1.5M according to its Form 990 filings for the past two years and is now engaged in a massive fund raising effort to raise the $1.5M necessary to close (see its website)}. After that – and as for the remaining $24,500,000! in principal and interest payments over years 2-10 following closing, well, “We’ll be praying…and hard”, you can hear them say.

For only $1.5M, JOY gets ownership and use of this valuable Church asset for 2 years. If it can’t raise the funds to continue the payments under the $16.5M Note, it figures that worst case it can sit down with the LCMS and try to renegotiate terms. For would the LCMS really stoop to an expensive and undoubtedly much publicized and embarrassing lawsuit against this “fine” Christian undertaking to enforce its unrealistic deal or to try to recover its station due to JOY’s default…or at least recover what’s left of it?

My theory explains many things. It explains the absurdly high price ($18M) Gateway is agreeing to (try to) pay; it explains Brashear’s bristling issuance of a “gag order” – he doesn’t want his percentage fee-based arrangement to get out; it explains his refusal to answer the very pointed and appropriate letter written to him by Bob Duesenberg in an effort to bring to light the nature and terms of his relationship with the LCMS Board; it explains Brashear’s breaking off of negotiations with Naomi Neidorff and friends – for after all, when your fee is based on a percentage of the purchase price, who cares about pursuing a $6-8 million deal when some hard praying “Christians” out west will agree to $18M?

A derivative action brought by Lutherans against their Board is the only way this deal can ever be “stopped” and the parties brought back to Square One. Apart from the loss of this excellent classical music in St. Louis, the proposed “sale” to Gateway – assuming Gateway can raise the $1,500,000 to close – represents the squandering of a very valuable Church asset by your Board which, one must conclude, was asleep at the switch when this snake Brashear entered its chambers….

Good luck to all of you.