Even though the U.S. Hispanic market is growing at a rapid pace, the Hispanic Television Network is having trouble staying alive.
“I’ve told my wife 14 times in the last nine months we’ve been here that we are through, and yet we keep managing to remain on the air,” said Steve Mortonson, interim chief financial officer of the troubled Fort Worth-based broadcast and cable network that is aimed at the Mexican-heritage Spanish-language audience. “We find just enough [money] to keep going.”
According to HTVN’s most recent quarterly filing with the Securities and Exchange Commission, the company’s “failure to pay an obligation has resulted in a hearing being scheduled for Jan. 15, 2002, for appointment of [a] receiver to liquidate the Company.”
“We ducked that bullet,” Mr. Mortonson said, though he declined to specify how. “We face them [bullets] daily.”
The company is now looking for a $10 million investor, said Michael Fletcher, HTVN’s chief operating officer. He said such an infusion of money would result in a company that is “almost debt-free and can get to profitability this year.” Short of that, the company is looking for $1.5 million in operating capital to keep going, he said.
Mr. Mortonson said HTVN hasn’t had much luck finding an investor because, “We are not big enough to attract the major guys. We are too complicated for an individual to fully grasp. We are so screwed up financially that none of the typical investment bank/Wall Street types are interested.”
Those financial problems include a dozen lawsuits from vendors and former executives, according to the SEC filing. In three of those suits, judgments in the amounts of more than $2.5 million, $123,000 and $39,000 have already been entered against HTVN. In addition, HTVN is in default on a $7.3 million loan.
HTVN’s stock was trading for $14 a share when Mr. Fletcher joined the company in 2001, and reached heights of $20 a share, Mr. Fletcher said. Today it’s trading at around 5 cents per share.
HTVN was formed in December 1999 when American Independent Network merged with Hispano Television Ventures, a producer of Spanish-language programming. HTVN operates its Spanish-language broadcast and cable network and has a 10 percent equity interest in Urban Television Network Corp., which targets the African American community. It also owns, operates or has affiliations with 19 television stations, according to the SEC filing.
Its abiding legal and financial troubles are in sharp contrast to the boom times under way at the top two Spanish-language networks, Univision and Telemundo. In fact, in the same week that HTVN has managed to finesse yet another dire deadline, Univision, the nation’s largest Spanish-language network, is launching a new network-Telefutura-to great fanfare with the station group that it acquired from USA Networks. Recently, Telemundo, the No. 2 Spanish-language network, which is being acquired by NBC, launched Mun2 Television, another new Spanish-language network. Both Mun2 and Telefutura are aimed at the younger Spanish-language demos.
HTVN’s troubles derive from an undercapitalized launch and the economic downturn that dried up the capital markets, according to Mr. Mortonson and Mr. Fletcher. In 2000, the company spent a relatively modest $25 million to $30 million on its launch and then, when a planned secondary offering to the public markets didn’t materialize, HTVN “ran out of cash,” Mr. Fletcher said.
When he became chief operating officer in February 2001, the company’s “burn rate” was $1.8 million per month, Mr. Fletcher said. Now it’s down to just $200,000 per month. “[HTVN] has reduced its recurring monthly expenses in almost every expense category, especially in the areas of payroll and programming,” the SEC filing said. “Additionally, current management has restructured the sales department to focus on generating sales from all available sources, especially local sales at owned and operated television stations.”
HTVN is available on cable in 130 cities, Mr. Fletcher said, though in many cities it is available in just a few thousand or even a few hundred digital-tier homes; currently, Cincinnati is the company’s largest cable market.
“We’ve been able to close 10-year [carriage] deals with cable companies,” Mr Fletcher said, and in June the company will start receiving cable subscriber fees, which Mr. Fletcher called one of the roads to profitability. But first there is the most immediate problem of all-meeting payroll. “We have never had payroll, in the nine months that I’ve been here, more than four hours in advance,” Mr. Mortonson said.