iHeartMedia Debt woes

iHeartMedia, which has a US$20.87 billion debt, managed to hold off a default notice by a group of senior debt holders.

The San Antonio, Texas-based company secured a temporary restraining order of 14 days, from a Texas court, rescinding notices of default received from a group of senior creditors. This period can be extended by the court.

The group is made up mostly of hedge funds, and accounts for 25% of outstanding principal of four of the company’s priority guarantee notes.

It claimed earlier this week that iHeartMedia violated its lending agreements by shifting $200 million from its outdoor advertising company, Clear Channel Outdoor Holdings, Inc., to another subsidiary, Broader Media LLC. It said it could call its $6 million debt due in 60 days. This could trigger other creditors to also call in their debts, forcing it into bankruptcy.

In documents filed in the State District Court in Bexar County, Texas, iHeartMedia denies the accusation. It asked for a temporary restraining order and a permanent injunction that would provide time to resolve the matter before its debt goes into default.

It said in a statement, “The strong performance of our operating business provides us with the flexibility to manage our capital structure in a prudent manner. In full compliance with our debt covenants, we continue to evaluate opportunities to strengthen our balance sheet. We believe our recent contribution of Clear Channel Outdoor Holdings, Inc. stock to our subsidiary Broader Media, LLC constituted a permitted investment under, and fully complied with, our financing agreements.”

A temporary restraining order condition for iHeartMedia is that it cannot sell or transfer any of its Clear Channel Outdoor Holdings Inc. shares until a hearing date is decided.

The senior debt holders would have the first chance to get at assets if iHeartMedia collapses. According to Billboard, the underlying impact of the $200 million transfer is that it would create a new debt, which would have more seniority than they have now. But this would allow iHeartMedia more breathing space to find new funds and pay the debt off at a later date.

iHeartMedia has the largest reach of any American radio or TV company, with 858 radio stations in 150 markets and over 110 million weekly listeners. Its iHeartRadio digital service has 80 million registered users by January 2016 – reaching that figure faster than any other radio or digital music service and even faster than Facebook.

It has been downloaded more than 850 million times, with 80 million social media followers and is available on more than 80 unique device platforms spanning in-home entertainment, wearables, gaming, mobile and auto.

But despite such impressive figures, as Billboard points out, its problem is that according to Edison Research, the 13 to 24 age group clocks up 21% of audio streaming time and a 39% share in radio listening. But it’s a different story for the 55+ age group: it’s 4% for streaming time and 71% for radio. The streaming figure is 34% for the 35 to 54 demographic.

Bloomberg reports that iHeartMedia has $193 million in bonds that mature in 2016, $230 million under a revolving credit line that’s due in 2017, more than $1 billion in obligations maturing in 2018 and $8.3 billion in bonds and term loans due in 2019.

In 2007, when it was Clear Channel, it had a net income of $938.5 million. Since the buy-out a year later, iHeartMedia has lost between $219.5 million and $4 billion a year.