• Clear Channel Outdoor and iHeartMedia Agree To Separation

    News came out on Friday that Clear Channel Outdoor and iHeartMedia had come to an agreement to separate Clear Channel to an independent stand alone Company, Clear Channel Outdoor Holdings, Inc.

    Insider spent some time reading through the 8K (which is a fairly short read) and a significant portion of the SEC and court filings that have led us to this point.  Here is some background and highlights of the agreement.

    Background

    The settlement agreement includes Clear Channel Outdoor Holdings, Inc. (“CCO”), iHeart Media, Inc. and also includes two minority stockholders of CCO, Norfolk County Retirement System and  GAMCO Asset Management, Inc.

    Both Norfolk and GAMCO had filed lawsuits against iHeartMedia, CCO, key investors and board members in those companies.  Both lawsuits focus on what GAMCO called intercompany agreements which are highly favorable to iHeartMedia by any measure.

    Insider particularly noted Norfolks claim in their lawsuit.

    “For years, Clear Channel has been bedeviled by its relationship with iHeart, which owns approximately 90% of Clear Channel’s outstanding stock and has stacked the Clear Channel Board with iHeart affiliates. Clear Channel was a wholly-owned subsidiary of iHeart before being taken public in 2005 and, in connection with its initial public offering (“IPO”), was saddled with a series of
    intercompany agreements governing its relationship with iHeart. Those agreements include a revolving promissory note (the “Revolving Note”) pursuant to which all of Clear Channel’s cash-on-hand is swept up to iHeart daily in return for an increase in the amount owed to Clear Channel by iHeart under the Revolving Note.”

    Insider had previously reported on the intercompany note, now amounting to over $1 billion, between iHeart and CCO.

    The Settlement

    Here are the significant highlights of the settlement agreement:

    • The cash sweep arrangement under the existing corporate services agreement between CCO and iHeartCommunications, a subsidiary of iHeartMedia, will terminate.
    • Any agreements or licenses requiring royalty payments to iHeartMedia and its debtor affiliates by CCO for trademarks or other intellectual property will terminate.
    • The parties agreed that CCO will recover 14.4% in cash on its allowed claim of $1,031,721,306 under the intercompany note owed by iHeartCommunications to CCO.
    • And mutual releases, including a release of all claims that have been asserted, could have been asserted or ever could be asserted with respect to iHeartMedia’s Chapter 11 cases and the lawsuits by GAMCO and Norfolk.

    All of this is contingent on the approval of the bankruptcy court and iHeartMedia exiting bankruptcy, but that is beginning to look very likely

    CCO Going Forward

    The companies announced that after exiting bankruptcy William Eccleshare, currently serving as Chairman and CEO of Clear Channel International, will become Chief Executive Officer of CCO.  Scott Wells will continue to lead CCOA as CEO, and will report to Mr. Eccleshare.

     

    Insiders take- Terrific news for CCO that the cash drain from the parent company will end.  Also to recover even 14% on the intercompany receivable is a win, given the circumstances.

    The bigger question is what will the new owners of CCO, mainly made up of the iHeartMedia lending group, who will hold a significant majority of the stock, want to do with their shares?  Will they hold for value or look to get any early exit and monetize their investment?  Will potentially make for a very interesting 2019.

     

     


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