According to Bloomberg, Gamco Asset Management Inc., which owns almost 10 percent of the outdoor-media subsidiary’s publicly traded shares, earlier this year accused CCOH’s board of violating a duty to protect its shareholders by always acting in the best interest of the parent company at the expense of the subsidiary.
Gamco particularly complained about an agreement that automatically routes daily CCOH revenues to iHeart. The deal leaves the outdoor unit “‘unable to exploit business opportunities” and with a “virtually uncollectible receivable" from its parent company of $640 million, Norman Monhait, Gamco’s lawyer, said in the initial filing in Delaware Chancery Court.
The outdoor media company’s board considers Gamco’s suit to be without merit and “takes seriously its responsibilities to the company and to all CCOH stockholders,” Wendy Goldberg, iHeart’s spokeswoman, said in an e-mailed statement in May 2016. “The board established a special committee of independent directors in 2013 for the specific purpose of monitoring the intercompany note between CCOH” and its iHeart parent.
Gamco backed iHeart in the recent Texas trial between the company and some of its senior lenders, who lost a battle to declare defaults on about $6 billion of notes after iHeart shifted 100 million CCOH shares to a unit beyond the lenders’ reach. The judge agreed with iHeart and Gamco that the share transfer was permitted under company loan terms. But, in a separate filing in the San Antonio case, Gamco said iHeart’s valuation of that deal at $500 million was “wrong.”
iHM has scrambled to stay current on roughly $20.8 billion in debt accumulated in 2008, when the company was acquired by private equity giants Bain Capital Partners LLC and Thomas H. Lee Partners LP. Almost $8.5 billion of these debts will come due in the next three years.
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