iHeartMedia files for Chapter 11

May 2018 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

May 2018 Issue

In an attempt to restructure its operations and reduce a debt of more than $20bn, leading global multi-platform media, entertainment and data company iHeartMedia, Inc. has filed for Chapter 11 under the US Bankruptcy Code.

The company, along with certain of its subsidiaries (not including Clear Channel Outdoor Holdings, Inc.), filed voluntary petitions in the United States Bankruptcy Court for the Southern District of Texas, Houston Division.

The filing includes a series of customary motions which seek to maintain iHeartMedia’s business-as-usual operations and uphold its commitments to its valued employees and other stakeholders during the Chapter 11 process. iHeartMedia believes that its cash on hand, together with cash generated from ongoing operations, will be sufficient to fund and support the business during the Chapter 11 restructuring proceedings.

In addition, the company has reached an agreement in principle with holders of more than $10bn of its outstanding debt and its financial sponsors. The agreement reflects widespread support across the capital structure for a comprehensive balance sheet restructuring. “The agreement is a significant accomplishment, as it allows us to definitively address the more than $20bn in debt that has burdened our capital structure,” said Bob Pittman, chairman and chief executive of iHeartMedia.

The debt is a result of a leveraged buyout in 2008, which saw private equity firms Thomas H. Lee Partners and Bain Capital Partners purchase Clear Channel Communications Inc. – as iHeartMedia was previously known – for $17.9bn. The deal, which closed just as the financial crisis began to severely impact the US economy, has meant the company has largely struggled under that debt ever since. Moreover, $8.4bn of the $20bn debt is due to be paid in 2019.

One option, proposed in late February 2018, was for SiriusXM Holdings parent company Liberty Media to inject $1.159bn into a reorganised iHeartMedia, a move that would see it acquire 40 percent in new common shares – 20 percent to be held by SiriusXM and 20 percent by Liberty Media. The proposed restructure would be subject to approval of a Chapter 11 plan by all parties.

iHeartMedia, the parent company of iHeartCommunications, Inc., specialises in radio, digital, outdoor, mobile, social, live events, on-demand entertainment and information services for local communities. The company is dedicated to using the latest technology solutions to transform the company’s products and services for the benefit of its consumers, communities, partners and advertisers, and its outdoor business reaches 31 countries across four continents, connecting people to brands using innovative new technology.

“iHeartMedia has created a highly successful operating business, generating year-over-year revenue growth in each of the last 18 consecutive quarters,” adds Mr Pittman. “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.”

Among the music companies listed as creditors are Nielsen (owed $20m), SoundExchange ($6.4m), Warner Music Group ($3.9m), Universal Music Group ($1.3m) and Spotify ($2.1m). In addition, Performance rights companies ASCAP and BMI are each owed a little over $1.4m, while Global Music Rights is owed $2m.

Serving as legal counsel to iHeartMedia is Kirkland & Ellis LLP. Moelis & Company is serving as the company’s investment banker and Alvarez & Marsal as financial adviser.

Mr Pittman concluded: “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as the number one audio company in the US.”

Fraser Tennant