iHeartMedia has reached an impasse on talks with some of its creditors.
Since winning a court judgement in May, the broadcaster has been trying to reach an agreement on how to restructure some $21 billion in debt.
The company has told the Securities and Exchange Commission its assessing whether to continue discussions “given the significant gap” between the proposals from various sides.
Franklin Resources Inc.’s subsidiary Franklin Advisors Inc. holds the largest amount of iHeart’s $6.3 billion of term loans and has been leading the discussions according to Bloomberg.
Failure to strike a deal will add to iHeartMedia’s difficulties in restructuring its debt load, of which about $10 billion is coming due in the next three years.
iHeart did make a counter-proposal, saying the interest rate would need to be reduced at least 75 basis points before it would agree to the make-whole requirements lenders asked for, according to the SEC filings. Bloomberg determines the loans currently pay at least 675 basis points (6.75%) above the benchmark rate. That would mean an interest rate on the debt in excess of 10%.
iHeart continues to evaluate various opportunities to strengthen their capital structure for the benefit of their stakeholders, and remain focused on positioning iHeartMedia for long-term growth.”
Read more at Radio Business Report.
Insiders Take – iHeart says they are focused on long term growth but have been selling very strong assets from their Clear Channel Outdoor division. S&P has a B+rating on the Clear Channel Outdoor’s senior debt with an expectation of recovery of 90-100% in the event of a payment default. The senior subordinate debt though currently has an expectation of recovery of 30-50%.
iHeart owns 90 percent of publicly traded Clear Channel Outdoor Holdings, the billboard owner. Gamco Asset Management owns the other 10 percent.
Gamco claims iHeart is pressuring Clear Channel to lend it money, which the radio station company doesn’t have the ability to repay.
iHeart already owes Clear Channel $640 million, according to the suit. Turning off that spigot from the billboard giant could be dangerous for a parent company that needs the cash.
With a strong chance of recovery, iHeart might not get much support from their senior lender who might think bankruptcy could be their best result.
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