iHeart Debt Solutions?
iHeartMedia is reaching do or die time with its handling of its $20.6 billion in debt.
The company filed a lawsuit on Monday in its homebase of Bexar County TX on Monday after its some of its creditors claimed in January that it violated its lending agreements by transferring shares of Clear Channel Outdoor Holdings Inc. to a new subsidiary, Broader Media. The intent in creating the new subsidiary was to sell new debt to help pay off the old.
The lawsuit filing is to confirm the legality of their moves and prevent the company from defaulting on its debt payments. iHeart seeks to have the judge order injunctions to “reaffirm our position that the contribution was permitted”. An SEC filing states that the creditors hold 25% of the company’s debt and that should the injunctions not be granted the defaults would trigger in 60 days entitling “the Holders to accelerate the underlying indebtedness and would trigger events of default under our other material indebtedness”.
The judge ruled today granting a temporary 14 day restraining order with the ability to extend for another 14 days until a full hearing can be held with the condition that iHeart not transfer any other shares during that period.
Reuters reports that iHeart has hired financial adviser Moelis & Co to help reduce the debt load.
iHeartMedia, Inc. (OTCBB: IHRT) today issued the following response to an event of default allegation made by a small number of the company’s lenders:
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. We strongly believe the notices of default issued by the lender group based on the contribution are invalid.
Prior to receiving the notices, we filed a lawsuit in the State District Court in Bexar County, Texas to reaffirm our position that the contribution was permitted. We intend to take any other actions necessary to protect iHeartMedia and remain willing to engage in constructive discussions with any of our various groups of lenders to position iHeartMedia for long-term growth.