UPDATE 3/5/18 2:00 PM: Investors in iHeartMedia Inc. have agreed to give the company some more time to work out the final details of an agreement that will allow it to wipe out most of its debt in a Chapter 11 bankruptcy.
The new proposal filed with the Securities and Exchange Commission this morning would reduce the company’s debt from $20.6 billion as of Sept. 30 to just under $5.8 billion under a Chapter 11 bankruptcy reorganization plan. Clear Channel Outdoor Holdings, the company’s billboard subsidiary, would be spun off on its own as part of the deal, according to mysantonio.com. Bondholders would receive stock in Clear Channel as well as a mix of equity in the newly recapitalized iHeart.
iHM now has until 11:59 p.m. Wednesday to reach agreement under a forbearance plan announced this morning. The agreement will also become null and void if the company defaults for other reasons.
iHM’s been teetering on the edge of insolvency for a while. It launched an offer almost a year ago — on March 15 — to try to renegotiate $14.6 billion of its more than $20 billion in debt by exchanging it for bonds with longer maturities and higher yields.
UPDATE 3/5/18 9:15 AM: iHeartMedia has signed a forbearance agreement with a group of its lenders, which will give it a few more days to work-out a restructuring deal.
The agreement averts a default which could lead to a Chapter 11 bankruptcy.
Under the agreement, the lenders have agreed not to trigger an event of default from the company’s Feb. 1 decision to skip a $106 million interest payment on its 14% senior notes due 2021.
The forbearance agreement will expire on Wednesday, March 7 at 11:59 pm Central time or if iHM defaults on any of its credit agreements, other than those covered in the forbearance agreement. As part of the agreement, iHM agreed not to make any payments on its legacy notes and 14% senior notes due 2021 during the forbearance period.
The company and its lenders spent Sunday night working out final details of a voluntary reorganization under Chapter 11 of the U.S. Bankruptcy Code that is expected to be filed within days.
Earlier posting....
The leveraged buyout of the nation’s biggest radio broadcaster, iHeartMedia, is a perfect example of the risks incurred when banks are allowed to put high multiples of leverage on a company. reports The NYPost.
iHM creditors Sunday night were working out the final details of a bankruptcy that is expected in days.
Private equity firms Bain Capital and Thomas H. Lee Partners in 2008 bought iHM (thenClear Channel) and financed the deal by having the lenders borrow money equal to roughly 9 times the company’s pre-tax cash flow.
That is well above the 6 times leverage limits President Obama placed on LBOs in 2013. President Trump’s regulator last week said he will remove those lower debt limits.
iHeart, with 855 radio stations, is profitable when not factoring in its interest payments, and in fact will not need debtor financing when filing for bankruptcy, sources said.
The company had a net loss of roughly $300 million in 2016 after making $1.8 billion in debt payments — indicating a slightly lower level of debt may have kept the company planning its growth instead of Chapter 11.
Debt also has been a problem for iHM because it made it difficult for it to invest in new technologies, unlike upstart Spotify.
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