No more iHeartRadio?

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  • Posted In: Radio Industry Discussion


  • Member
    #180131

    iHeartMedia Triggers 30 Day Clock On Restructuring Or Bankruptcy

    What does this mean exactly?


    Participant
    #180134

    It means they’re forcing the creditors to talk with them. It’s a smart idea, and gives them leverage because the creditors know they’re left holding the bag if iHeart defaults and they don’t work out something. If they can get reasonable terms (by reasonable, I mean from iHeart’s perspective, and such terms would mean they would continue as a going concern, assssssssss opposed to being forced out of business) then iHeart should be in good shape to stay in business.

    Students should study iHeart’s history in business school as how NOT to operate a growing business. Growing too fast, and paying too much by multiples.

    #180159

    If the talks fail, could iHeart be forced into bankruptcy??

    And if so, would it be Chapter 11, or even Chapter 7??

    And could it lead to the company’s radio stations being sold-off at “fire sale” prices??


    Participant
    #180160

    If the talks fail, could iHeart be forced into bankruptcy?? And if so, would it be Chapter 11, or even Chapter 7?? And could it lead to the company’s radio stations being sold-off at “fire sale” prices??

    It’d almost certainly be a Chapter 11 bankruptcy–like with Cumulus.  While this may still be a risky move, everything points to iHeart doing it deliberately (again, like with Cumulus); in other words, it probably could’ve made this payment, but decided not to, perhaps just so it would pretty much force the issue.

    As I mentioned in a comment on the main-site post, the Express-News has a longer story (at https://www.mysanantonio.com/business/local/article/iHeart-misses-bond-payment-takes-another-step-to-12542717.php) that includes some analyst comments.  Inside Radio (at http://www.insideradio.com/free/skipped-payment-part-of-bigger-iheart-restructuring-strategy/article_9790200a-07e4-11e8-9409-b7718030e61c.html) references both that report and a paywalled WSJ story.

     


    Participant
    #180161

    And if so, would it be Chapter 11, or even Chapter 7?? And could it lead to the company’s radio stations being sold-off at “fire sale” prices??

    No, it won’t be a Chapter 7.  Chapter 7 means, “I give up.  My company is worthless.”  A Chapter 7 would likely mean every iHeart station would leave the air.
    That isn’t happening.  Fire sale prices are unlikely as well.  I suppose you could see some smaller markets getting sold cheaply, but KIIS and WHTZ are never going to go for $1.

    Participant
    #180163

    And if so, would it be Chapter 11, or even Chapter 7?? And could it lead to the company’s radio stations being sold-off at “fire sale” prices??

    No, it won’t be a Chapter 7. Chapter 7 means, “I give up. My company is worthless.” A Chapter 7 would likely mean every iHeart station would leave the air.
    That isn’t happening. Fire sale prices are unlikely as well. I suppose you could see some smaller markets getting sold cheaply, but KIIS and WHTZ are never going to go for $1.
    Although I am not now, nor have I ever been an employee of WBZ-AM, Boston – heck, I’m not even an industry insider! – iHeart recently acquired WBZ (from the CBS Radio spin-off), so I hope they (iHeart) don’t eff this station up.

    Participant

    Member

    Member
    #181646

    There is not, nor will there ever, be “fire sale prices” resulting from a bankruptcy.  That just does not happen.  Were it to happen, the tax bill on the assessed value of those licenses would wildly exceed the revenue raised from the sales of the licenses.  They would intentionally be losing money, which is rather the opposite of what creditors want in a bankruptcy restructuring.

    What WILL happen is the outstanding debt will be converted into equity.  While the radio industry is not the ATM machine it was 20 years ago, it’s still quite profitable for well-run stations.  So now all those creditors will have more equity in a massive, super-powered radio operator that can immediately unleash all that power to dominate the entire industry.  That means lots of profits and THAT’S what creditors want.  Profits to increase the value of their holdings, which they can either sell and make money off of, or keep and leverage it for other deals that might make even more money (in radio or, more likely, in other industries).

    I do think you’ll see iHeart and Cumulus shedding SOME stations as part of this process but it’ll only be the weakest ones.  The ones that don’t contribute much to overall profitability.  And most of them won’t be SOLD, they’ll be trades with other operations: a lot of smaller signals across X markets for one bigger one (or ones) in Y markets.  That sort of thing.  When you SELL signals, you have to pay taxes on the sale.  When you TRADE signals, you usually don’t.  Those tax bills can be ugly, because you’ve often amortized the value of the license already but your taxes on a sale are based on the value of the sale.  So trades are always preferable.


    Participant
    #181648

    https://news.radio-online.com/cgi-bin/rol.exe/headline_id=b15364

     

    Update on Iheart

     

    iHeartMedia and certain lenders signed a Forbearance Agreement on Sunday to delay lenders from accelerating iHM’s $20 billion in debt into default, according to a filing with SEC on Monday. Under the agreement, the lenders have agreed not to trigger an event of default from the company’s February 1 decision to skip a $106 million interest payment on its 14% senior notes due 2021. The agreement ends March 7 at 11:59pm CT or by a default not listed in the agreement. iHM has also agreed not to make any other debt payments during the agreement’s time frame.

     

    As previously reported, despite a year of negotiations on a restructuring plan, a formal support agreement still isn’t in place with the most-senior lenders. The company mised a February 1 interest payment and the 30-day grace period is running out. iHM also skipped payments on two more sets of bonds on Thursday.

    #181654

    Will iHeart be forced to spin-off many (or most, or even all) of their stations??

    If they have to spin-off a lot of their stations, you could see EMF buy at least a few stations to try to get “K-Love” into as many markets as they can.


    Participant
    #181655

    Will iHeart be forced to spin-off many (or most, or even all) of their stations??

    No.

    If they have to spin-off a lot of their stations, you could see EMF buy at least a few stations to try to get “K-Love” into as many markets as they can.

    You won’t see many, if any, iHeart stations getting spun. I’d think, if anything, EMF’s current buying spree may be motivated by a concern that iHeart and Cumulus will be stronger post-bankruptcy and may cause station values to go up.


    Participant
    #181658

    There is not, nor will there ever, be “fire sale prices” resulting from a bankruptcy. That just does not happen. Were it to happen, the tax bill on the assessed value of those licenses would wildly exceed the revenue raised from the sales of the licenses. They would intentionally be losing money, which is rather the opposite of what creditors want in a bankruptcy restructuring. What WILL happen is the outstanding debt will be converted into equity. While the radio industry is not the ATM machine it was 20 years ago, it’s still quite profitable for well-run stations. So now all those creditors will have more equity in a massive, super-powered radio operator that can immediately unleash all that power to dominate the entire industry. That means lots of profits and THAT’S what creditors want. Profits to increase the value of their holdings, which they can either sell and make money off of, or keep and leverage it for other deals that might make even more money (in radio or, more likely, in other industries). I do think you’ll see iHeart and Cumulus shedding SOME stations as part of this process but it’ll only be the weakest ones. The ones that don’t contribute much to overall profitability. And most of them won’t be SOLD, they’ll be trades with other operations: a lot of smaller signals across X markets for one bigger one (or ones) in Y markets. That sort of thing. When you SELL signals, you have to pay taxes on the sale. When you TRADE signals, you usually don’t. Those tax bills can be ugly, because you’ve often amortized the value of the license already but your taxes on a sale are based on the value of the sale. So trades are always preferable.

    Aaron,
    You and “David Eduardo” on the other message board – the one with more daily postings – consistently explain complex matters from a rational perspective, stating them in coherent, understandable language.
    THANK YOU!

    Participant
    #181664

    There is not, nor will there ever, be “fire sale prices” resulting from a bankruptcy. That just does not happen. Were it to happen, the tax bill on the assessed value of those licenses would wildly exceed the revenue raised from the sales of the licenses. They would intentionally be losing money, which is rather the opposite of what creditors want in a bankruptcy restructuring. What WILL happen is the outstanding debt will be converted into equity. While the radio industry is not the ATM machine it was 20 years ago, it’s still quite profitable for well-run stations. So now all those creditors will have more equity in a massive, super-powered radio operator that can immediately unleash all that power to dominate the entire industry. That means lots of profits and THAT’S what creditors want. Profits to increase the value of their holdings, which they can either sell and make money off of, or keep and leverage it for other deals that might make even more money (in radio or, more likely, in other industries). I do think you’ll see iHeart and Cumulus shedding SOME stations as part of this process but it’ll only be the weakest ones. The ones that don’t contribute much to overall profitability. And most of them won’t be SOLD, they’ll be trades with other operations: a lot of smaller signals across X markets for one bigger one (or ones) in Y markets. That sort of thing. When you SELL signals, you have to pay taxes on the sale. When you TRADE signals, you usually don’t. Those tax bills can be ugly, because you’ve often amortized the value of the license already but your taxes on a sale are based on the value of the sale. So trades are always preferable.

    Aaron,
    You and “David Eduardo” on the other message board – the one with more daily postings – consistently explain complex matters from a rational perspective, stating them in coherent, understandable language.
    THANK YOU!
    David Eduardo always has worthwhile insight, regardless of the topic. I’ve read him for many years and always find his input valuable.

    Participant
    #181669

    Great info!

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