Key term could kill KOCE purchase

Marisa O’Neil

A crucial piece of the KOCE-TV Foundation’s plan to buy the station

from the Coast Community College District is a deal-breaker, a

district trustee said Thursday.

While the foundation met its Wednesday deadline to agree to terms

of the sale, the district’s attorney, Milford Dahl, said, the

agreement put together included the district’s having 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 is “absolutely” a deal-breaker, board trustee George

Brown said. The board is set to vote whether to accept or reject the

deal Wednesday.

“That’s a major one,” he said of the condition. “I don’t

understand why the foundation thinks that’s no problem. If we

subordinate the loan, we get put behind everyone else.”

He “can’t imagine” that the board would agree to it, Brown said.

“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.”

Specific details had not been released by press time, but 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.

If the trustees don’t agree to the terms, George Brown said, the

district might then explore the possibility of selling to Christian

broadcaster Daystar Television Network, a spurned bidder that is

suing the district for the right to buy the station.

“They might make us an offer we can’t refuse,” he said. “But I

hope the foundation can get the money somehow.”

Brown and trustee Jerry Patterson previously released written

statements declaring their desire to preserve the station’s PBS

format.

But a letter sent March 8 to the district from Daystar CEO Marcus

Lamb offered to keep one channel in its digital spectrum for

programming from the district and foundation. When all television

stations switch to a digital format in 2006, as mandated by the

Federal Communications Commission, KOCE-TV could occupy between four

and six separate channels, Lamb said in his letter.

“If there’s any way to do the deal with the foundation, I would

probably support it,” George Brown said. “But not to the point of

doing something inappropriate.”

* MARISA O’NEIL covers education. She may be reached at (949)

574-4268 or by e-mail at [email protected].