iHM Uses B-Word In Court Filings, Fears Losing Key Employees

Buried in more than 1,700 pages of litigation filed last week between iHeartMedia Inc. and a group of its investors, who say the company technically defaulted on its debt, is a startling revelation.

According to The Express-News, If the investors prevail, that could accelerate payments on $6 billion of the company’s bonds and lead to a cascading of events that “could ultimately force iHeart to file for bankruptcy,” the company said in its lawsuit filed in state district court.

iHeartMedia had an astounding $20.6 billion in long-term debt as of Dec. 31 — debt that it has been continually restructured over the years. It’s kind of a self-imposed bankruptcy type of process designed to kick the can down the road.

A recent repositioning of assets aimed at issuing additional long-term debt sparked the debt crisis that erupted this week. IHeartMedia filed a lawsuit Monday against some of its bondholders. The lawsuit, which delves into the murky world of corporate accounting, aims to retract and stop the issuance of default notices.

If that doesn’t happen, the default notices could trigger a series of events leading to a formal iHeartMedia to seek protection from its creditors in bankruptcy court.

Two Boston private-equity firms bought 70 percent of iHeartMedia for $24 billion in 2008; the other 30 percent is publicly traded. Much of the company’s debt stems from the acquisition.

Prior to the acquisition, the company had $18.8 billion in assets and $5.2 billion in long-term debt. At the end of last year, iHeartMedia had just $13.8 billion in assets and $20.7 billion in debt.

The company also fears it will lose key employees. “Highly valuable employees have many opportunities at other companies, and if we lose them, it will cause incalculable damage to the business,” the filing adds.

But the entire company’s future is at stake. If the “default event” occurs, the bondholders “can try to accelerate the notes and claim that more than $6 billion (in other debts) is immediately due and payable,” the company said. That could force iHeartMedia into bankruptcy, according to the lawsuit.

iHeartMedia is asking the court for a trial date on or before April 1.

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