Thursday, April 7, 2016

iHeartMedia Default Fight To Go To Trial

iHeartMedia will make its case next month in a Texas state court to block lenders from declaring it has defaulted on billions of dollars in loans.

The two sides Wednesday agreed to continue to abide by a temporary restraining order until trial begins next month, iHeart said in a statement, adding that it is “pleased with the outcome and look[s] forward to an expedited trial.”

iHeartMedia brought the Texas lawsuit in March to put the brakes on claims by the lenders holding more than $3 billion in debt that an equity transfer violated the terms of their indentures and triggered a default.

The lender group includes a number of private-equity funds—including Benefit Street Partners LLC and Canyon Capital Advisors LLC---as well as investment firm giant Franklin Resources Inc.

Negotiations between the parties have been ongoing since December when the lenders first wrote to iHM about the transaction, according to a letter viewed by The Wall Street Journal.

However, negotiations between the lenders and iHM broke down in March, resulting in the alleged events of default and subsequent lawsuit.

At issue in the Texas litigation is whether the transfer of shares that the lenders say are worth $1.241 billion is permitted under the terms of the loan agreements.

A ruling in favor of the lenders would permit the group to proceed with the events of default, which would trigger cross defaults on billions of dollars worth of iHeart’s debt.

The Texas lawsuit comes as iHeartMedia begins to grapple with ways to address its massive debt load that totals $20.6 billion, including $8.3 billion maturing in 2019. The debt load largely stems from a 2006 leveraged buyout led by Bain Capital Partners LLC and Thomas H. Lee Partners LP.

In its statement Wednesday, iHM said that “the strong performance of our operating business provides us with the flexibility to manage our capital structure in a prudent manner, and we will continue to evaluate opportunities to strengthen our balance sheet.”

Meanwhile iHM citing erroneous news reports regarding bankruptcy concerns, CEO Bob Pittman and CFO Rich Bressler jointly issued a company memo to clarify the situation for its staff.
You’ve probably read or heard about some incorrect stories regarding our company and what a recent hearing in San Antonio means. There have even been some headlines that claim the outcome of this hearing could result in iHeartMedia’s bankruptcy—but that is not at all what this hearing is about. 
Here are the facts. This hearing is the result of the lawsuit we filed against a small group of lenders who disagreed with us on a question related to our overall strategy of making long-term positive changes to our capital structure. We filed the case to ask the court to confirm our right to move Clear Channel Outdoor shares from one of our subsidiaries to another—the judge is not deciding the question of whether we have to pay the debt, she is deciding if the share contribution is permitted. We would like to move these shares because it provides us greater flexibility to manage our capital structure. But the judge’s ruling—either way—will not result in the company filing for bankruptcy, as some press reports suggested. 
None of this will disrupt our operating business. In fact, the strong performance of our operating business, which is a reflection of all the great work you do every day, is what provides us with the flexibility to manage our capital structure in a prudent way—and therefore we are able to continue to evaluate opportunities to strengthen our balance sheet. 
We hope this clarifies the situation for you, and we’re sorry you’ve had to be subjected to such misinformation in the press. 

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