iHeart Media Being Sued By A Minority Investor

Yes, iHeart Media did recently come off a victory in the Texas courts over a group of creditors.  That does not mean their troubles are over. Gamco Asset Management owns nearly 10% of the stock in Clear Channel Outdoor Holdings not held by iHeartMedia.  Gamco is suing iHeart for improperly diverting revenue from subsidiary Clear Channel Outdoor Holdings to its corporate parent.

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Gamco says in a suit filed in Delaware Chancery Court that iHeart should not be allowed to move revenues from CCOH to repay debt for the parent company.  The filing alleges that an agreement that routes daily CCOH revenues to iHeart leaves the outdoor subsidiary with a “virtually uncollectible receivable” from its parent company of $640 million.

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iHeart considers the allegations in the suit to be baseless and without merit. In a statement, spokeswoman Wendy Goldberg tells RBR+TVBR: “The Clear Channel Outdoor Holdings, Inc. Board of Directors takes seriously its responsibilities and duties to the company and to all CCOH stockholders. The board established a special committee of independent directors in 2013 for the specific purpose of monitoring the intercompany note between CCOH and iHeartCommunications, Inc. We are confident that the board and the special committee have properly discharged their responsibilities and duties to the company and to all CCOH stockholders and will continue to do so.”

During the recent Texas case in which some senior lenders said a stock move was not allowed and violated iHeart’s debt covenants, Gamco actually backed iHeart.  The court ruled the stock move was allowed and clarified that iHeart was not in default.

In a Bloomberg article,  Gamco says it appears iHeart is preparing for bankruptcy which would “freeze” its ability to repay” the money it owes CCOH. “IHeart is abusing its position as CCOH’s controlling stockholder in an attempt to stave off its own financial demise and avoid forcing the private equity defendants to infuse iHeart with new equity capital,” states Gamco in the suit.

 


 

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