iHeartMedia files for Chapter 11 bankruptcy in US
iHeartMedia Inc, the parent company for iHeartRadio, has filed for Chapter 11 bankruptcy after it reached an in-principle agreement with creditors to restructure its overwhelming debt and reduce its debt by $10 billion.
It is the biggest owner of radio stations in the US, and assets include a live concert company and a music streaming service.
This means that the two biggest radio station operators in the United States have gone into bankruptcy.
The second largest, Cumulus Media Inc., took that path three months ago.
iHeartMedia chairman and chief executive Bob Pittman said of his move, “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.
“Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s No. 1 audio company…
“iHeartMedia has created a highly successful operating business, generating year-over-year revenue growth in each of the last 18 consecutive quarters.
“We have transformed a traditional broadcast radio company into a true 21st century multi-platform, data-driven, digitally-focused media and entertainment powerhouse with unparalleled reach, products and services now available on more than 200 platforms, and the iHeartRadio master brand that ties together our almost 850 radio stations, our digital platform, our live events, and our 129 million social followers.”
Its lucrative billboard subsidiary, Clear Channel Outdoor Holdings Inc, is not part of the Chapter 11 proceedings.
iHeartMedia said it would continue to operate during the bankruptcy process from cash in hand and cash made from its divisions.
This was just one of the few details released about the Chapter 11.
“This makes the dept ratio of local companies like SCA pale by comparison,” said an Australian industry insider.
A pre-packaged Chapter 11 proceeding is a cleaner and cheaper process, and allows the company keep trading and retain its value.
It bypasses the alternate scenario where different classes of creditors will battle to ensure that their class (usually the senior ones) will get the most amount of money.
This way, the bankruptcy will be shorter and smoother, which means less legal fees.
With a $8 billion debt maturing in 2019, last year the company began warning creditors that it would not be able to meet its debt obligations in 2018 unless the debt was refinanced.
On February 1, it skipped a $106 million interest payment, which triggered its latest crisis.