America’s largest radio company iHeartMedia files for bankruptcy
(Reuters) – IHeartMedia Inc IHRT.PK filed for Chapter 11 bankruptcy on Thursday as America’s largest radio station owner struck a deal with creditors to more than halve its $ 20 billion debt.
The company said the deal it struck with holders of more than $ 10 billion of its outstanding debt would restructure its balance sheet by transferring 94% of the shares in the reorganized company to its lenders.
IHeartMedia struggled with debt incurred to fund a 2008 LBO of $ 17.9 billion of what was then Clear Channel Communications Inc. This deal led by Bain Capital LLC and Thomas H. Lee Partners LP was closed just like a the crisis began to undermine the US economy.
In the years that followed, the operator of 849 radio stations faced increasingly intense competition for advertisers and listeners to Internet platforms such as music streaming services.
“The LBO put this massive debt on the balance sheet the company was supposed to grow into,” an iHeartMedia lawyer told US bankruptcy judge Marvin Isgur at a hearing in Houston Thursday. “We are here to resize the balance sheet. “
The company has its origins in the 1972 purchase of KEEZ-FM in San Antonio, Texas, where it is currently headquartered. He said he would fund the business and bankruptcy process from available cash and cash generated from operations.
He said in a statement that he was seeking to maintain business as usual during the bankruptcy and “keep commitments” to his 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 the Chapter 11 filing.
DEBT REDUCTION AGREEMENT
IHeartMedia had $ 3.58 billion in revenue in 2017 and reaches 271 million radio listeners, which the company says gives it a wider reach than Alphabet Inc. GOOG.O Google. The company also sells advertising on digital platforms, at live concerts and on syndicated programs featuring such figures as Rush Limbaugh and “American Idol” host Ryan Seacrest.
However, the company spent $ 1.4 billion on interest payments last year and has over $ 8 billion in debt maturing by the end of 2019.
Lawyers for the company told the court that iHeartMedia was on the verge of having enough support from creditors to force its plan on holdouts.
As part of the company’s debt reduction deal, holders of secured loans and secured notes, who owe nearly $ 13 billion, have agreed to accept about $ 5.6 billion in new debt. and 94% of the equity of a reorganized iHeartMedia, according to court documents.
These creditors will also receive iHeartMedia’s 89.5% interest in Clear Channel Outdoor Holdings Inc. CCO.N, the largest display company in the world, which has not filed for bankruptcy.
IHeartMedia also proposed that holders of junior debt, who owe more than $ 2 billion, receive their prorated 5 percent stake in the reorganized company and $ 200 million in new secured notes.
Existing shareholders would receive 1% of the shares in the reorganized company, according to court documents.
IHeartMedia faces a legal challenge from a group, led by investment fund Angelo, Gordon & Co, which holds $ 190 million in junior debt, according to the company.
Their lawyer said in Thursday’s hearing that they plan to take legal action to challenge the claim that they are low priority unsecured creditors, and Isgur said he wanted a hearing on this dispute before April.
IHeartMedia has sparked interest from John Malone’s Liberty Media Corp FWONA.O, which on February 26 offered a deal to buy a 40% stake in restructured iHeartMedia for $ 1.16 billion. The deal would unite iHeartMedia with Liberty’s Sirius XM Holdings Inc SIRI.O satellite radio service.
Reporting by Tom Hals in Wilmington, Delaware and Mekhla Raina in Bengaluru; Editing by Susan Thomas and Matthew Lewis