Fitch Ratings bumped the San Antonio-based radio and billboard giant’s debts down a notch to “C” from “CC.” Both ratings are considered junk bond ratings, reports the San Antonio News-Express.
As an incentive for the new debt exchange offer, iHeartMedia is offering debt holders up to 49 percent of the equity in its international billboard subsidiary, Clear Channel Outdoor Holdings Inc., according to iHeartMedia’s debt exchange offer announcement. The billboard subsidiary is considered the healthiest part of iHeartMedia.
The remaining 51 percent would be spun off into a separate company owned by iHeartMedia shareholders, including the two Boston-based private-equity firms that acquired 70 percent of the former Clear Channel Communications company in 2008. Those companies are Bain Capital and Thomas H. Lee Partners.
If the offer doesn’t draw enough interest from debt holders, the radio-and-billboard company would remain consolidated and intact.
The board would separate the radio and billboard sides of the company it it gets enough interest, but the level of participation necessary remains unclear, Fitch Ratings analyst Patrice Cucinello said Thursday. iHeartMedia has not announced a percentage of participation needed to spin off the billboard subsidiary.
iHeartMedia is offering to exchange up to $14.6 billion of the $20.37 billion in debt the company held as of Dec. 31. Much of the total debt stems from the 2008 leveraged buyout of the company by Bain Capital and Thomas H. Lee Partners.
“Fitch views the proposed exchange offers as distressed debt exchanges given our belief that the present capital structure is unsustainable and that the exchange offers are being conducted largely to avoid bankruptcy,” the Fitch Ratings report stated.
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