iHeart Creditors Reject Another Offer From Company as They Push for Chapter 11
November 30 2017 - 8:36PM
Dow Jones News
By Soma Biswas
A key group of creditors rejected iHeartMedia Inc.'s latest debt
restructuring proposal, and countered with their own deal that
requires the company to file for chapter 11, the company disclosed
on Thursday.
The latest development in long-running restructuring
negotiations at iHeart, the largest radio network in the U.S. by
number of stations, comes a day after Cumulus Media Inc., the
second-largest, filed for bankruptcy, succumbing to billions of
dollars of debt and competitive pressures from digital
platforms.
"The industry's best days are behind it, even though it's going
to be around for years," said Lance Vitanza, managing director and
analyst at Cowen Inc.
A large group of bond and loan holders led by Franklin Resources
rejected iHeart's latest proposal even after the company increased
the cut of equity offered the group to more than 87% in both the
iHeart radio business and the company's controlling stake in its
Clear Channel Outdoor Holdings Inc. billboard unit, the company
said.
Under the company's latest proposal, iHeart's private-equity
owners Bain Capital and Thomas H. Lee Partners, would retain 12.5%
of the shares in both.
Discussions between iHeart and the Franklin-led group will
continue, however, according to the filing on Thursday.
The Franklin-led group, advised by PJT Partners Inc., has
tweaked its initial offer, but largely stuck to its guns, demanding
the company hand over 95% of the equity in its radio network, and
all of iHeart's equity in Clear Channel, and offering the
private-equity owners and junior bondholders 5% of the equity in
the radio business and warrants in Clear Channel, according to
several bondholders.
The company's plan would cut $7.7 billion of iHeart's $15.5
billion in debt, and the proposal by the Franklin-led group would
reduce even more debt.
The company has given ground since late October when it
disclosed a term sheet offering the creditor group over 49% in the
radio business and 70% of the shares iHeartMedia owns in publicly
traded Clear Channel Outdoor. IHeartMedia owns 89.5% of Clear
Channel, long considered the company's crown jewel.
In the October negotiations, the Franklin-led group offered $300
million in value to the private-equity owners and junior
bondholders. Creditors' view of the value of the offers will depend
on their outlook about iHeart's valuation, noted the
bondholders.
A spokeswoman for PJT Partners declined to comment. A
representative for Franklin didn't return calls.
IHeartMedia has been trying to restructure $15.5 billion in debt
since March, when it launched a public tender for a debt swap. The
debt swap garnered little interest, and the company started
engaging various creditor groups. It sweetened its offer in July in
a bid to avoid bankruptcy.
The company has issued repeated going-concern warnings. iHeart
has small amounts of debt due this year and next, but then debt
payments ramp up to a total of $8.4 billion in debt maturing in
2019.
Write to Soma Biswas at soma.biswas@wsj.com
(END) Dow Jones Newswires
November 30, 2017 20:21 ET (01:21 GMT)
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