iHM Wants to Pay Up to $33 Million in Bonuses

iHeartMedia Inc., a radio-station operator that filed for bankruptcy in March, is seeking a judge’s approval for a bonus plan that could pay its top executives as much as $33 million next year, according to The Wall Street Journal.

In papers filed Tuesday in U.S. Bankruptcy Court in Houston, iHM lawyers said the bonuses — earmarked for 11 executives — are needed to motivate its top managers.

Bob Pittman

Without the bonuses “in a highly competitive and challenging industry,” compensation for top executives would fall well below peer companies and that “could significantly undermine” iHeart’s ability to motivate senior management, court filings said.

Among those in line for a bonus is Chief Executive Robert Pittman. The MTV co-founder, who has led iHM since 2011, collected more than $14 million in the 12 months leading up to the company’s bankruptcy filing.

Bankruptcy law prohibits bonuses that reward executives for simply sticking with companies, but it does allow for incentives tied to hard-to-reach milestones.

iHeart bonuses are based largely on cash generated from operations, court papers show. It includes only income from regular operations, ignoring items such as gains or losses on asset sales or on financing activities, interest or tax changes.

“With confirmation of the debtors’ plan of reorganization and a path to emergence from chapter 11 in sight, maintaining a highly motivated workforce is as important as ever,” iHeart’s lawyers said. A hearing to consider approval if iHeartMedia’s reorganization, paving the way for the company’s exit from chapter 11, is slated for Dec. 11.

iHeart says it expects total 2019 bonus payouts to the top executives of $22.1 million. But if the San Antonio-based company hit its top targets the insiders’ incentive plan could cost as much as $33.2 million next year.

Among the potential stumbling blocks to the restructuring plan, however, is a lawsuit from iHM’s so-called legacy bondholders. The bondholders are suing the radio station operator, saying the proposed plan shortchanges them on their recovery. A hearing on the lawsuit concluded last month in bankruptcy court without a ruling.

iHeart, which has more than 850 radio stations, filed for bankruptcy after nearly a year of talks with its creditors on the terms restructuring more than $20 billion in debt, the bulk of which was left over from a 2008 leveraged buyout.