iHM: New Bond Deal Is Better Than Bankruptcy

A nearly two-year long battle between iHeartMedia Inc. and a bondholder group led by Franklin Resources Inc. is coming to a head in the wake of the company's proposal of a sweetened offer, reports The Wall Street Journal and Fox Business Insider.

A resolution to the standoff could allow iHeart to avoid bankruptcy.

In its battle to win over bondholders who hold the key to its fate, iHeart Communications has signed up a group of funds led by Eaton Vance Investment Management, Symphony Asset Management and OppenheimerFunds to convince holders -- especially Franklin -- that it is better to take the new deal than push the company into bankruptcy, according to people familiar with the matter.

It is one of the last of several companies taken over in the private-equity megadeals of a decade ago that is still grappling with debt it took on in its 2006 leveraged buyout by Thomas H. Lee Partners and Bain Capital.

For months, iHeart had circulated an offer that hands over as much as 49% of the equity in both iHeart and its valuable Clear Channel Outdoor Holdings billboard unit to bondholders if a substantial group of them agree to extend maturities and take haircuts, or markdowns, on their debt. In that proposal, private equity owners Thomas H. Lee and Bain would hold on to a 51% stake. The proposal garnered little interest, and the holdout group, of which Franklin has the biggest slice of iHeart debt, has argued that they are entitled to more equity in both companies, according to the people familiar with the matter.

Earlier this week, the company disclosed details of talks with another group of bondholders led by Eaton Vance, Symphony and OppenheimerFunds over the new deal. In its revised proposal, iHeart is offering bondholders a number of sweeteners, chief among them an additional $500 million in debt backed by 51% of the shares in iHeart and in Clear Channel, according to public filings. The new slug of debt will effectively delay Thomas H. Lee's and Bain's ability to monetize their shares in the company until the debt is paid off, according to a person familiar with the matter.

The new proposal, like the former one, pushes out by two years the maturity of a big chunk of iHeart's debt, and bondholders must take a haircut on their debt.