iHeartMedia bankruptcy postponed a few days as creditor negotiations continue
Radio giant iHeartMedia’s bankruptcy, expected as early as yesterday, has been postponed a few days by its creditors.
iHeartMedia is the broadcast company that owns internet radio station iHeartRadio.
According to an update filed with the Securities and Exchange Commission, the creditors agreed over the weekend not to place the San Antonio-headquartered company in default for the time being.
This would give them extra time to put the final details of a last minute deal that would wipe out most of its $20 billion debt.
It would see lenders inject a fresh $20 million into the company, place iHeartMedia in bankruptcy during which it would wipe out most of the debt, and transfer equity ownership to creditors.
This would include most of the ownership of iHeart and all of the company’s outdoor advertising division Clear Channel Outdoor Holdings.
In 2008 when Private equity firms Bain Capital and Thomas H. Lee Partners in 2008 bought iHeart (formerly Clear Channel), they financed the deal by having the lenders borrow money equal to roughly 9 times the company’s pre-tax cash flow.
If not for the interest repayments, iHeart’s 855 stations are profitable.
In 2016 it posted a net loss of $300 million after paying $1.8 billion in debt payments.
On February 1, it missed an interest payment on its 14.00% Senior Notes due 2021, which triggered the current situation.
Under negotiations held in the last 48 hours, lenders of the 2021 notes would receive 5% of the recapitalised iHeart
The current negotiations includes US media mogul John Malone’s Liberty Media, which last month offered $1.16 billion in exchange for a 40% stake.
It was rejected by other creditors, who said the figure was too low.
Liberty owns 69% Sirius XM after it stepped in in 2009 with a $530 million loan as Sirius tottered close to bankruptcy,
Liberty, which has a significant stake in Live Nation, last year also made a bid for Pandora.
Liberty already has a significant stake in iHeart after buying $400 million of the debt from GSO Capital Partners.
There are obvious synergies between Liberty and iHeart, a leading player in radio broadcasting and streaming.
One of these, analysts suggested, would be to keep down high wages to on-air talent.
Of iHeart’s $20 billion of debt, $8.3 billion matures in 2019.