iHeartMedia has reached an agreement with the holders of more than $10 billion of its outstanding debt for a restructuring through the Chapter 11 bankruptcy process.
iHeart will continue to operate all of its properties while undergoing the restructuring that will reduce their debt by $10 billion. The restructuring will be overseen by the United States Bankruptcy Court for the Southern District of Texas, Houston Division. The company expects to have liquidity to continue operations during the bankruptcy proceedings.
Among the largest unsecured creditors owed by iHeart in trade payable or licensing fees are Nielsen who is owed $20,874,637.87, SoundExchange owed $6.4 million, Cumulus Media $5.6 million, Cox Media Group $5 million, Warner Music Group $3.9 million, CBS $2.82 million, Hubbard Broadcasting $2.3 million, and Spotify $2 million. Also unsecured is Law Debenture Trust Company’s $1.9 billion in 14% Senior Notes due in 2021 and BNY Mellon’s $309 million in 7.25% Senior Notes due in 2027 and $178 million in 6.875% Senior Notes due in 2018.
The Clear Channel Outdoor subsidiary will not be going through the bankruptcy process.
A FAQ Sheet produced by iHeart about the filing can be viewed here.
iHeartMedia, Inc. (PINK: IHRT) today announced that it has reached an agreement in principle with holders of more than $10 billion of its outstanding debt and its financial sponsors. The agreement reflects widespread support across the capital structure for a comprehensive balance sheet restructuring that will reduce iHeartMedia’s debt by more than $10 billion. iHeartMedia, America’s #1 audio company, will continue operating the business in the ordinary course as a leading global multi-platform media, entertainment and data 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,” said Bob Pittman, Chairman and Chief Executive Officer. “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. Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”
To implement the balance sheet restructuring contemplated by the agreement in principle, iHeartMedia and certain of its subsidiaries, including iHeartCommunications, Inc., have filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of Texas, Houston Division. Clear Channel Outdoor Holdings, Inc. and its subsidiaries did not commence Chapter 11 proceedings.
The Company has filed with the Bankruptcy Court a series of customary motions seeking to maintain business-as-usual operations and uphold its commitments to its valued employees and other stakeholders during the process. These “first day” motions, which the Company expects to be granted in short order, will help facilitate a smooth transition into Chapter 11.
iHeartMedia believes that its cash on hand, together with cash generated from ongoing operations, will be sufficient to fund and support the business during the Chapter 11 proceedings.
For additional information about iHeartMedia’s restructuring, including access to Court filings and other documents, please visit https://cases.primeclerk.com/iHeartMedia, call the Company’s Restructuring Information Hotline at (877) 756-7779 (for toll-free domestic calls) and (347) 505-7142 (for tolled international calls), or email [email protected].
Kirkland & Ellis LLP is serving as legal counsel to iHeartMedia, Moelis & Company is serving as the Company’s investment banker, and Alvarez & Marsal is serving as the Company’s financial advisor.
Mark W.
I’m glad to see the term “prepackaged bankruptcy” wasn’t misapplied in this article as it was when Cumulus filed Chapter 11 last autumn. While a prepack was possibly IHM’s goal, they have fallen well short of that objective.
My guess is the roughly $10 billion in creditors who have signed Restructuring Support Agreements are mostly if not entirely secured creditors who are holders of the company’s Senior Secured Credit Facility loans and priority guarantee notes. That debt totals nearly $13 billion. So, more than two-thirds of that class is likely on board. The enterprise value of IHM as currently structured is probably in the neighborhood of $10 billion, maybe $12 billion max. Thus, even *this* class of creditors is impaired to a degree.
Behind the above group, you’ve got the senior unsecured creditors. These debtholders are owed about $7.5 billion. This group is messy from an analytical standpoint, because in some cases, the debt was issued by a specific subsidiary. My guess is almost none of these debtholders entered into RSAs.
The senior secured debtholders may want a smooth transition to a new management team, etc., and might want to offer some crumbs to Bain Capital, et al. to promote such a process at the expense of the senior unsecureds. But here’s the rub – if one believes the enterprise value of the current company is in that $10 – $12 billion bandwidth, the senior unsecureds technically aren’t entitled to a dime anyway!!! That means any “crumbs” thrown to Bain Capital, et al. would actually be coming out of economic consideration to which the senior secureds would otherwise be entitled, not the senior unsecureds. The senior secureds, therefore, may be able to make an argument that any objections filed by the senior unsecureds as to the economics of any proposed plan should be largely disregarded by the court.
At the end of the day, I think the senior secured creditors will receive nearly all of the equity in the reorganized iHeart plus all or nearly all of iHM’s current equity interest in Clear Channel Outdoor, a couple crumbs will be thrown to the junior unsecureds, and a couple crumbs will be thrown to Bain Capital.
One interesting theory that the junior unsecureds could try to use to sway court opinion – they may make an argument that the parts of iHM are worth more than the whole, and that if the assets are valued in such a fashion, the pot of economic value available to stakeholders as a whole is enlarged. Such an argument by the junior unsecureds could lead to some wheeling & dealing in terms of how equity in the reorganized iHM is allocated.