Report: Lawsuit May Undermine iHM's Re-Organization Plan

Last week, iHeartMedia said nearly all of its creditors and shareholders had approved the company’s plan to restructure its debt. Under that plan, iHeart would scale down its outstanding debt from $16.1 billion to $5.8 billion. For now, the reorganization doesn’t include any plans to sell stations or cut station budgets.

There are, however, factors that could complicate iHeart’s removal from bankruptcy without selling assets, reports The L-A Business Journal.  One creditor, Delaware firm Wilmington Savings Fund Society, has filed a lawsuit against iHM in bankruptcy court, claiming the media company owes hundreds of millions of dollars from loans Wilmington made to it in the 1990s. The Delaware investment outfit claims it should not be held to the same standard as creditors involved with iHM during the Great Recession period.

The lawsuit’s claims are strong enough to at least delay iHeart’s bankruptcy exit, said Zev Shechtman, a bankruptcy lawyer at the law firm Danning Gill Diamond & Kollitz.

At the same time, a potential new controlling shareholder could change iHeartMedia’s plans.

iHM spokeswoman Wendy Goldberg declined to comment on how either the Wilmington Savings lawsuit, or a possible new controlling shareholder, could undermine iHeartMedia’s plan to leave bankruptcy.

In an email, Goldberg wrote, “All our stations have operated as usual since last March. Our operating business continues to be strong, and the high listenership to our radio stations in Los Angeles reflects that.”

iHeartMedia, Burbank

Despite entering bankruptcy proceedings, iHM’s income has grown over the past year while its main competitor, Entercom, has struggled.

In the third quarter of this year, revenue from iHM’s operations rose 3 percent to $1.58 billion from same period last year. Entercom’s revenue, by contrast, declined 4 percent year-over year to $378 million in the third quarter.

IHeart’s financial instability should be an opportunity for Entercom to emerge as the No. 1 player in the Los Angeles radio market, Jacobson said. However, Entercom’s performance since its acquisition of CBS Radio has lagged.

The company also assumed $1.2 billion in debt in acquiring CBS Radio, and its stock price has tumbled to $6.36 per share at close of business Dec. 4, compared to $14.80 a share one year earlier.