iHeartMedia, the debt-burdened radio conglomerate, bowed to the inevitable late on Wednesday (March 14) and filed for Chapter 11 bankruptcy protection.
In a statement, the company said it had reached an agreement with the holders of more than $10 billion of its debt.
“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” CEO Bob Pittman said in a statement. “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”
iHeart, formerly known as Clear Channel, is the nation’s largest radio company, with more than 850 stations. It also owns iHeartRadio’s music streaming service, a large concert business, and a 90% stake in Clear Channel Outdoor, the billboard company. Clear Channel Outdoor did not file for bankruptcy. For years, the company has been saddled with $20 billion in debt, the legacy of a leveraged buyout in 2008.
“What they’ve done to try to stay afloat is financial engineering,” says Seth Crystall, an analyst at Debtwire. “There’s no reason to file for bankruptcy until you have to… but we’re at that point.”
Among the music companies listed as creditors on the iHeart docket are Nielsen (owed $20 million); SoundExchange ($6.4 million); Warner Music Group ($3.9 million); Universal Music Group ($1.3 million); and Spotify ($2.1 million). Performance rights organizations ASCAP and BMI are each owed slightly over $1.4 million while Global Music Rights is looking at a $2 million debt.
While dramatic, the filing is not likely to have much noticeable effect on the company’s day-to-day. “They’re not shutting down. They’re going to pay their bills,” Crystall says. “If you were listening to iHeartRadio, or going to iHeart concerts, you will not even know the difference.”Radio Ink has more.
The company, owned by Thomas H. Lee Partners and Bain Capital, has been in negotiations for nearly a year with its primary debtholders, led by Franklin Resources Group. In public term sheets, the equity holders offered a pre-packaged bankruptcy under which the creditors would get 89.5% of the equity. The equity holders would keep 5.25% of the company. The creditors’ counteroffer sought a higher stake in the company — 94.75% — while offering the equity holders nothing....MUCH MORE
The terms have changed since our last post:
"iHeart bankruptcy proposal would erase $14.8 billion of debt as lenders extend deadline" (IHRT)
May 4, 2017
Bain Capital/Thomas H Lee-Controlled iHeartMedia Probably Facing Bankruptcy (IHRT)
July 26, 2017
Bain Capital/Thomas H Lee-Controlled iHeartMedia Continues Stately Descent Into Bankruptcy (IHRT)
As was said back in May:Aug. 4, 2017
"This wouldn't really be noteworthy except for the fact IHRT is the largest operator of radio stations in the U.S. and the debt involved is a bit over $20 Billion.".
"iHeartMedia edges closer to bankruptcy with $174 million 2Q loss" (IHRT)