iHeartMedia Files For Bankruptcy

iHeartMedia Inc. filed for bankruptcy protection after reaching an agreement in principle with investors over a balance-sheet restructuring, a decade after a private-equity-led buyout left the company laden with billions in debt, according to The Wall Street Journal.

iHeartMedia said in a statement early Thursday the agreement in principle was with holders of more than $10 billion of its outstanding debt and its financial sponsors.

The chapter 11 filing in the U.S. Bankruptcy Court for the Southern District of Texas, Houston Division, came after months of talks with investors on restructuring terms.

Based in San Antonio, iHM operates 856 terrestrial stations and controls Clear Channel Outdoor Holdings Inc., one of the biggest billboard companies in the world.

The company said Clear Channel Outdoor and its subsidiaries didn’t commence chapter 11 proceedings. It also said its day-to-day operations would continue as usual during the restructuring process.

iHM said it believes its cash on hand, together with cash generated from continuing operations, will be sufficient to fund and support the business during the bankruptcy proceedings.

Bob Pittman

“iHeartMedia has created a highly successful operating business, generating year-over-year revenue growth in each of the last 18 consecutive quarters. We have transformed a traditional broadcast radio company into a true 21st century multi-platform, data-driven, digitally-focused media and entertainment powerhouse with unparalleled reach, products and services now available on more than 200 platforms, and the iHeartRadio master brand that ties together our almost 850 radio stations, our digital platform, our live events, and our 129 million social followers,” said Bob Pittman, Chairman and Chief Executive Officer.

“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure. Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”

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Despite sluggish sales and a steady loss of listeners to new platforms, the company had avoided bankruptcy for years by pushing out debt maturities through refinancing and swaps.

Private-equity firms Thomas H. Lee and Bain Capital purchased iHeart, then known as Clear Channel Communications, in 2008 on the eve of the financial crisis. The $26.7 billion deal was troubled almost from the start, and the private-equity firms had to sue its banks to stand by debt they had promised to provide for the deal.

Over the past five years iHeartMedia has spent more on debt payments than it earns. With more than $8 billion in debt maturing next year, the company began talks with creditors on a deal to swap a big chunk of debt for some of its equity.

The bankruptcy filing paves the way for iHeartMedia to shed most of the debt it took on in the 2008 buyout.

Recent talks had centered on a plan to hand 94% of the equity in iHeartMedia’s radio business and all of the equity in Clear Channel Outdoor to senior creditors led by Franklin Mutual Advisers Inc. The company and its creditors had been haggling for weeks over how much of the remaining 6% of equity in the radio business should go to the company’s junior bondholders and private-equity sponsors.

The company’s radio network remains dominant in the industry, but it has like its peers failed to substantially increase revenue in recent years. The company earned just enough money to make its annual debt payments, but never enough to pay down the debt from the 2008 buyout.