iHeartMedia Dealt Another Setback

iHeartMedia Inc. was dealt another blow Wednesday as the company’s financial condition continues to deteriorate under the weight of its $20.5 billion in debt.

According to The San Antonio News-Express, a New York group determined that iHeartMedia’s partial debt payment last week triggered repayment on financial contr

acts tied to the company’s bonds. The decision will primarily affect the hedge funds and other Wall Street investors that speculated on iHeartMedia’s financial future and won’t necessarily have a big or immediate impact on iHeartMedia’s books.

But the decision is another marker of distress in the radio and billboard giant’s troubled finances. The struggling company has made a series of unusual maneuvers in recent months in an attempt to restructure its finances. The costs to service its crushing debt load are burning through cash as it struggles to keep up with interest payments and repay bonds as they mature. It reported its 27th consecutive quarterly loss last month.

The three major bond rating companies all downgraded iHeartMedia’s debt ratings earlier this month, with S&P Global and Fitch Ratings both saying that the company’s current financial situation was “unsustainable.” The company is likely to default on its debt over the next year or two as it faces bankruptcy or some other form of debt restructuring, Fitch said in a recent analyst note.

Philip Brendel, a senior analyst covering distressed debt for Bloomberg Intelligence, said that iHeartMedia has been “engaging in financial engineering for a while now” as the company has tried for years to figure out ways to deal with its more than $20 billion in debt.

The company announced plans last week to repay $192.9 million of a $250 million bond payment due Dec. 15. It withheld $57.1 million in notes held by subsidiary Clear Channel Holdings Inc. — money it essentially owes itself — due to a technicality that would have triggered collateral requirements on other debt.

The so-called springing lien could have required iHeartMedia to put up “principled property” — or some of its 850 radio stations — as collateral against some of its older debt as the result of a series of complex bond deals negotiated before iHeartMedia was purchased in a leveraged buyout in 2008, said Fitch analyst Patrice Cucinello.

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