Largest US Radio Company Files For Bankruptcy

On Thursday, iHeartMedia - the largest radio conglomerate in the US - finally succumbed to its enormous debt burden and filed for a long-anticipated Chapter 11 bankruptcy protection (iHeartMedia Inc., 18-31274, U.S. Bankruptcy Court, Southern District of Texas) after the company and a majority of its creditors reached an agreement for a prepack deal to eliminate tens of billions in debt while the company continues to operate.

After trying to negotiate a deal with creditors since last March, the company said in a statement that it had reached an agreement in principle with investors holding more than $10 billion of its debt, along with its private equity owners. The pact, intended to give the company a framework for a speedier reorganization, would cut iHeart’s debt by more than $10 billion, it said.

"The agreement ... is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” Chief Executive Bob Pittman said.

Based in San Antonio, iHeart controls 856 US radio stations and employs 17,000 workers worldwide, along with Clear Channel Outdoor Holdings, the largest billboard company in the world. iHeart’s traditional businesses - the radio stations and the Clear Channel Outdoor billboard unit - contribute the bulk of the company's revenue. The Chapter 11 filing didn’t include the billboard unit.

iHeartMedia said it believes it has enough cash on hand, and will earn enough through regular business operations to keep its business running through the restructuring talks, although in light of the recent Toys "R" Us liquidation which took place six months after that particular Chapter 11, we doubt many existing employees will stay there long.

iHeart

Given the enormity of the debt, Bain Capital and Thomas H Lee who LBOed the company on the eve of the financial crisis in a massive $27 billion deal which was troubled from the start, will surrender most of their ownership stake per the WSJ.

Recent talks had centered on a plan to hand 94% of the equity in iHeartMedia’s radio business and all of the equity in Clear Channel Outdoor to senior creditors led by Franklin Mutual Advisers Inc. The company and its creditors had been haggling for weeks over how much of the remaining 6% of equity in the radio business should go to the company’s junior bondholders and private-equity sponsors.

Equity stakes had been a key sticking point in recent talks, with creditors demanding almost all of iHeart and 100 percent of its healthy Clear Channel unit according to Bloomberg. Malone’s Liberty Media sought to break the logjam late in February by offering $1.2 billion in new loans in return for a 40% stake. JCDecaux SA, the world’s biggest outdoor-advertising agency, also has expressed interest in buying some of Clear Channel’s assets.

To be sure, bankruptcy was only a matter of time: over the past five years iHeartMedia has spent more on debt payments than it earns. With more than $8 billion in debt maturing next year, the company began talks with creditors on a deal to swap a big chunk of debt for some of its equity. This isn't the first piece of depressing news for the waning radio industry in recent months: The iHeart filing comes three months after Cumulus Media, the No. 2 radio broadcaster, filed for bankruptcy.

Meanwhile, there are questions about the company's ultimate viability.

Radio still has enormous reach, but like print, the advent of digital advertising has siphoned off a reliable revenue stream, and left advertisers unwilling to pay the premiums they once happily accepted. iHeart's broadcast stations still reach a staggering 265 million Americans, more than any other media company (including Google and Facebook). However, newer media such as Spotify’s streaming service and SiriusXM’s satellite broadcasts have cut into the audience and put a damper on sales. IHeart, led by Chief Executive Officer Robert Pittman, countered with its own streaming services and a live-events business offering concerts and awards shows.

iHeart's most valuable asset - in the eyes of its creditors - is Clear Channel Outdoor Holdings, a subsidiary to focuses on billboards. Two years ago, the company rolled out a couple of on-demand subscription services to try and compete with Spotify and Apple Music, which were eating into radio's revenues. They have not lived up to the company's hopes.

As Variety points out, among the music companies listed as creditors on the iHeart docket are Nielsen, owed $20 million, SoundExchange, owed $6.4 million, Warner Music Group, $3.9 million, Universal Music Group, $1.3 million, and Spotify, $2.1 million. Performance-rights organizations ASCAP and BMI are each owed slightly over $1.4 million while Global Music Rights is looking at a $2 million debt.

As Bloomberg notes, the bankruptcy caps a yearlong standoff with lenders and bondholders on its latest debt-cutting plan. The deadline was extended more than 20 times as negotiators exchanged proposals and iHeart sweetened the terms. The current attempt at an accord followed at least a dozen debt revisions over the past decade.

The full bankruptcy filing is below.

Comments

archie bird Thu, 03/15/2018 - 07:48 Permalink

is this a result of disinvestment of advertising dollars from Rush Limbaugh's show?  as i recall there were activists contacting adverstisers about his derogatory remarks regarding women and so forth.

EuroPox Thu, 03/15/2018 - 07:53 Permalink

So, $20bn of debt and 17,000 workers - that is $1,176,479 of debt per employee. At a 5% interest rate, each worker would have to generate $55,000 cash each year to pay the interest bill alone.  How many of them can do that I wonder...

No great surprise that all this 'financial engineering' (Toys R Us, Claires, etc.) is collapsing.  I bet it looked great on the spreadsheet but the real world is a bitch.

 

jmack Thu, 03/15/2018 - 07:53 Permalink

     "Borrow too much money to consolidate and become the largest in an industry, then declare bankruptcy to get rid of the debt burden."   how to become a billionaire.

ToSoft4Truth Thu, 03/15/2018 - 07:57 Permalink

Who still listens to radio?  Waze did away with the last reason, local traffic reports. 

Are any of you still paying for cable TV?  C'mon.  Xfinity?

Sonny Brakes Thu, 03/15/2018 - 08:01 Permalink

Well deserved. Their product is nothing more than one long infomercial sparely sprinkled with globalists' agenda. No one's down for that. My ears are not for sale.

Riddle me this iHeart, why am I still listening to the same cuts from the 80s and 90s over and over being announced like they were the latest hits? What's the problem?

'cause I still haven't found what I'm looking for

It wasn't a good song when it came out and it hasn't gotten any better.

Listeners are looking for subversion and the radio lady thinks that:

I work in an office, I get my summers off, I spend my summers at the cottage; I need advice about how to recover from a hangover on Superbowl; I need guidance when it comes to keeping the pounds off at Christmas, yes Christmas, there, I said it; I need the weather and traffic every ten minutes; every movie coming out of Hollywood each week is better than the movie they tried to push down my throat last week; etc...

That shit gets old fast. And for God's sake, why do radio talk show hosts keep interrupting themselves by telling us what coming up in the next hour. Get to the goddamn point.

I've timed it out and more than 50% of radio airwaves are commercials even when they give you the impression that they're doing a show. Saturdays and Sundays are the worse, but some stations are selling their evening airwaves to the highest Shiller. It's bad, real bad, and I'd rather listen to myself fart than listen to STUPID down DUMBING radio advertisements.

The problem with businesses today is that they are only in it for the money and the people who work for them are expected to be in it for the opportunity to be prostitutes. It won't end well.

analyser Thu, 03/15/2018 - 08:02 Permalink

Short Amazon in Trumpdepression. In deflation , amazons weak margins will get hit. Currently the highly profitable AWS division is subsidizing the lossmaking package business. Higher sales, higher losses and this before the big deflation. The stock is worth 0 if we get 30 percent deflation

Trumpdepression    www.canarydeath.com

Wahooo Thu, 03/15/2018 - 08:03 Permalink

Spotify’s streaming service and SiriusXM’s satellite broadcasts have cut into the audience and put a damper on sales.

 

No kidding! Who wants to listen to mind-numbing commercials like "I love my windows" or "My number two doesn't look like a number two".

NYC_Rocks Thu, 03/15/2018 - 08:04 Permalink

Proving yet again that debt and equity aren't that different.  They are both claims on a business with different contract terms.  Too many companies are overleveraged thanks to the Fed subsidizing the market.  Debt looks "cheap" and "less dilutive" until it isn't.  The investors deserve what they got.