Report: Debt Costs Continue To Burn iHM Cash

iHeartMedia Inc. is expected to report another loss when it releases its earnings results Thursday — its 28th loss over the last 29 quarters — as the company works to stave off bankruptcy.

According to the Express-News, the interest payments alone on iHeartMedia’s $20.4 billion in debt will consume any possible profit and restrict the company’s cash flow, analyst said this week.

The company lost $388 million loss and reported weak cash flow in the first quarter. But the loss is expected to narrow in the second quarter because radio and billboard advertising usually is stronger as the fiscal year progresses, analysts said. It reported a surprise profit of $106.4 million in the fourth quarter of last year, but it was due to a one-time gain from selling off some of its assets.

Debtwire Senior Credit Analyst Seth Crystall said he couldn’t estimate how much the company lost during the second quarter, but he projected that it generated between $1.5 billion and $1.6 billion in revenue. Crystall said as much as $885 million likely came from radio operations and about $675 million was generated from billboard activity.

Cash flow for the second quarter was about $475 million, Crystall said.

“But it will be negative cash flow. Interest expenses for the quarter will be between $460 million to $470 million, so most of the cash is eaten up right off the bat. Any capital expenditures makes it negative,” Crystall said.

An unexpected slump in first-quarter advertising revenue reduced cash flow by 21 percent, executives said in May. One analyst said second-quarter cash flow likely will be improved.
“In the second quarter, the company doesn’t have the same cash interest payments they had in the first quarter. That should be helpful in terms of liquidity. The cash flow should be better,” said Philip Brendel, a Bloomberg Intelligence credit analyst.

The company has been locked in negotiations with its investors trying to buy it more time to repay its massive debt load. Roughly $316.5 million in bonds come due this year, $324.2 million in 2018 and $8.4 billion in 2019. The company had $365 million in cash as of March 31.

iHeartMedia is in the midst of a $14.6 billion debt-exchange offer in which it is seeking partial debt forgiveness on loans and bonds and a two-year extension of loan and bond maturities. The company’s main owners, Bain and Lee, are offering lenders and bondholders up to 49 percent in equity of the radio and billboard units if enough of them accept the debt-exchange offer terms.

The company is trying to reach a pre-bankruptcy agreement with its lenders and bondholders, but less than 1 percent of the offer has been exchanged so far since the company announced the deal March 15.