A year ago, lenders to radio broadcasting giant iHeartMedia were getting threats from private-equity firms Bain Capital and Thomas H. Lee Partners, who demanded they take a haircut on $15 billion in bonds and cede control of the company in order to avoid a bankruptcy filing.
As soon as today, however, iHeart is expected to file for Chapter 11, with creditors led by Franklin Resources and Pimco poised to seize a controlling stake worth about $11 billion (including Clear Channel Outdoor).
Bain and THL, meanwhile, are expected to end up with a stake of about 2 percent, worth maybe $100 million.
The “new reality,” insiders say, is that creditors are wising up and banding together against private-equity firms. In the case of iHeart, that meant Franklin lining up 31 creditors for an unprecedented cooperation agreement that amassed enough debt to stop Bain and THL from forcing their plan through bankruptcy court.
The lucrative bondholder backlash has surfaced as “private equity has gotten increasingly aggressive in an attempt to save some of their investments,” Seton Hall Law Professor Stephen Lubben told The Post. “Basically the attitude seems to be, ‘Let’s see if we can get away with this.’”
Meanwhile, iHeartMedia said this morning in a regulatory filing that it had revised its proposal to noteholders, lenders and equity holders to restructure the company’s debt. The new drafts update the proposed restructuring support agreement and term sheet that iHeart filed on March 5. The company cautioned that “no agreement has been reached” and “discussions remain ongoing.”
The pre-packaged agreement on file with the SEC calls for Clear Channel Outdoor Holdings, iHM's billboard advertising operation, to be spun off from the company, with the holders of the term loan credit facility claims and the priority guaranteed notes maturing in 2023 to become the holders of the economic interest in the Outdoor operation. It also calls for other debtors to receive new iHM stock, or a combination of new stock and special warrants, with the amounts for each creditor weighed against the amount of debt they hold from the company. Billboard is citing press reports suggesting that the creditors in line for the new stock will receive as much as 93 percent of the equity in the re-organized company.
Further, iHM will get new funding sources in the form of a new senior secured asset revolving credit facility, and a new secured $5.75 million in debt. As part of the plan, Liberty Media has offered to give the company $1.16 billion for its financing needs in exchange for a 40 percent equity stake in the restructured iHeart. Liberty already owns a controlling interest in SiriusXM, which views terrestrial radio as its biggest rival in the car.
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