iHeartMedia, Largest U.S. radio company, files for bankruptcy

Story by Reuters
Written by Tom Hals

Updated info: http://www.insideradio.com/free/iheartmedia-to-have-a-capital-structure-that-matches-its-strong/article_efb334b4-2898-11e8-8b49-13a5fe32cfc7.html

IHeartMedia Inc (IHRT.PK) filed for Chapter 11 bankruptcy on Thursday as the largest U.S. radio station owner reached an in-principle agreement with creditors to more than halve its $20 billion in debt.

The company said it ‍reached the agreement with holders of more than $10 billion of its outstanding debt that would restructure its balance sheet by transferring 94 percent of the stock in the reorganized company to its lenders.

IHeartMedia has struggled with debt that was taken on to finance a $17.9 billion leveraged buyout in 2008 of what was then Clear Channel Communications Inc. That deal led by Bain Capital LLC and Thomas H. Lee Partners LP closed just as a financial crisis began to undermine the U.S. economy.

In the years that followed, the operator of 849 radio stations has faced intensifying competition for advertisers and listeners from internet platforms such as music streaming services.

“The agreement ... is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” Chief Executive Bob Pittman said in a statement.

The company, which traces its roots to the 1972 purchase of KEEZ-FM in San Antonio, Texas, where it is currently headquartered said it would fund the business and bankruptcy process from cash on hand and cash generated from operations.

It said in a statement it was seeking to maintain business as usual during the bankruptcy, and to “uphold its commitments” to its staff. It employs 12,400 people, according to court records.

The filing comes less than four months after Cumulus Media Inc, which operates 445 U.S. radio stations, filed for Chapter 11.

DEBT-CUTTING DEAL

IHeartMedia had $3.58 billion in revenue in 2017 and reaches 271 million radio listeners. The company also sells advertising on digital platforms, at live concerts and on syndicated programs featuring personalities such as Rush Limbaugh and American Idol host Ryan Seacrest.

However, the company spent $1.4 billion on interest payments last year and has more than $8 billion in debt maturing by the end of 2019.

Under the company’s debt-cutting deal, holders of secured loans and secured notes, who are owed nearly $13 billion, agreed to accept about $5.6 billion in new debt and 94 percent of the equity in a reorganized iHeartMedia, according to court documents.

These creditors also will receive iHeartMedia’s 89.5 percent stake in Clear Channel Outdoor Holdings Inc (CCO.N), the world’s largest billboard company, which did not file for bankruptcy.

IHeartMedia also proposed that junior debt holders, who are owed more than $2 billion, will receive their pro rata share of 5 percent of the equity in the reorganized company and $200 million in new secured notes.

Existing shareholders would receive 1 percent of the stock in the reorganized company, according to court documents.

The junior debt holders are expected to actively oppose the agreement, said Brian Coleman, iHeartMedia’s treasurer, said in a filing with the U.S. Bankruptcy Court in Houston.

Investors led by funds affiliated with Angelo, Gordon & Co took iHeartMedia to a New York court last month in a failed bid to protect what they said was the seniority of the debt.

IHeartMedia has also drawn interest from John Malone’s Liberty Media Corp (FWONA.O), which proposed on Feb. 26 a deal to buy a 40 percent stake in a restructured iHeartMedia for $1.16 billion. Such a deal would unite iHeartMedia with Liberty’s Sirius XM Holdings Inc (SIRI.O) satellite radio service.

Shares of iHeartMedia lost three-quarters of their value in the second half of 2015 and have not recovered. The pink sheet stock traded at 62.5 cents in early Thursday trade. Shares of Clear Channel Outdoor climbed 2 percent to $5 on the New York Stock Exchange.