National Public Radio's board of directors yesterday rejected unanimously a key condition for a life-saving loan from the Corporation for Public Broadcasting, despite fears that the network could collapse into bankruptcy this week without help.
The condition: that NPR hand over title to its satellite equipment as collateral for a $9.1 million loan from CPB it needs to pay its debts by Sept. 30.
"Now is the time for the system to stand up and say no," urged Patricia Swenson, general manager of KBPS, Portland, Ore. "Now is the time CPB needs to hear from us. It is no time for us to waffle. It would be better for us to go down for policy."
Swenson was one of many station mangers who called Donald Mullally, the interim chairman of the NPR board yesterday, urging rejection of CPB's proposed transfer of permanent ownership of the satellite equipment to a trustee group of member stations.
CPB presented that condition to NPR on Saturday. Early yesterday, in a meeting conducted by telephone, the NPR board voted unanimously to reject any proposal that involved transfer of title.
The CPB board replied in the afternoon by reaffirming its stand in its own telephone meeting, and CPB president Edward Pfister joined the NPR interconnect with its member stations to tell them that "our position is being misrepresented and mischaracterized."
Though both sides emphasized they would continue talking, the NPR board's rejection, and the strong endorsement of its stations, brought the troubled negotiations between NPR and CPB to a halt. The stations' reactions were especially important because they have been asked by CPB to guarantee the loan agreement by pledging their federal funds in case NPR defaulted. CPB's Pfister said Sunday that 40 to 45 more stations were needed to meet the corporation's minimum of 200 station agreements.
"We recognize we are up against the wall," said Mullally. "But we believe we have produced a workable proposal."
NPR management, and the stations who agreed, contend that CPB is asking for a restructuring of its system.
Some of the stations were adamant about CPB's intentions.
"We do not feel this is policy, but a power grab by CPB. I think Pfister and Rockefeller Sharon Rockefeller, chairman of the CPB board are the dreadful duo of restructuring," said Ruth Hirschman, general manager of KCRW, Santa Monica.
Not all agreed with the NPR board. William Kling, the president of KSJN, St. Paul, Minn., said the satellite equipment was not important enough to quarrel over, nor is it important "whether it's owned by NPR or CPB, as long as NPR manages it."
David Ives, the president of WGBH, Boston, one of the satellite-using or "uplink" stations that CPB has pinpointed as a possible trustee, said, "We have plenty of things to handle without taking over the interconnect. But my instructions are to make a deal."
While NPR and CPB were clearly drawing their battle lines, bills and the specter of bankruptcy were looming.
"A minute before bankruptcy is not the instance to create divisiveness among the stations," said Mullally, referring to the trustee arrangement.
Mullally said he feels that bankruptcy, which would give the network time to reorganize (but not to solve cash problems), would damage NPR's reputation among creditors. Janet Kenney, the general manager of KWAX, Eugene, Ore., who has not signed the CPB agreement, said, "If we have to take a Chapter 11 to buy time, I say take it."
According to George Miles, the acting chief financial officer, NPR now owes "over $5 million" to creditors including Western Union, which owns the satellite on which channels are leased to NPR and others; Oliver T. Carr, the realtor who owns the network's building and who NPR said was threatening eviction over $270,000 in back rent; and others.
"Last week we paid $20,000 to C&P, because they were threatening to cut off the phones," said Miles. He said NPR had $85,000 in the bank but added, "we are down to the bare, bare, bare necessities, down to the bone."
Another pressing bill is this Friday's payroll for 300 employes. The company, said Miles, might delay payday until next Monday, when it is scheduled to receive its $1 million monthly federal appropriation from CPB. However, a CPB source said, "I don't think NPR can take the programming money for granted."
Other reasons for rejecting the offer, said Mullally, included the timing of the proposal and its necessary tie-in to the loan agreement.
Mullally said, "the issue is not now a legal one but a policy one--whether NPR should be stripped of an asset by force."
He said the member stations had talked of reorganization, but preferred a leisurely timetable.
Stating that the CPB proposal "could change the nature of public radio," he also questioned the likelihood that possible future partners in joint ventures would be interested if the satellite services were owned by someone else. The CPB proposal calls for a three-year lease of the satellite equipment to NPR. Mullally said the equipment is valued at $2.3 million.
The negotiations over the loan started after the CPB board, headed by Sharon Rockefeller, voted to help NPR out of its deficit problems.
Last week NPR proposed a secured loan agreement, under which ownership of the equipment would go to CPB if NPR defaulted on the loan. "If that is good enough for Chase Manhattan, it should be good enough for CPB," said Howard Hill Jr., general manager of KANU, Lawrence, Kan.