Struggling radio broadcaster IHeartMedia Inc. reached an agreement with a group of lenders that could forestall a fight over whether the company violated its debt agreement, according to two people with knowledge of the matter.
The creditors have agreed to temporarily hold off from filing a default notice claiming that IHeart breached its debt terms by shifting assets to its Broader Media LLC subsidiary last year, said the people, who asked not to be identified because the deal hasn’t been made public. Under the so-called standstill agreement, the company won’t move any additional assets, the people said. The arrangement, which runs through March 2, can be extended if both sides agree, they said.
The deal gives creditors an opportunity to propose a plan to address IHeart’s more than $12 billion in debt coming due in the next five years, said the people. The company, formerly known as Clear Channel Communications Inc., has been weighing how to address its wall of borrowings, a person with knowledge of the matter said last month.
IHeart shares rose more than 5 percent to $1.20 at 2:54 p.m. in New York before retreating to close at $1.11. The company’s 10 percent bonds due in 2018 jumped 4 cents on the dollar to 38 cents at 4:31 p.m. in New York.
The senior creditor group, which is represented by investment bank PJT Partners Inc. and law firm Jones Day, is working on a debt exchange that would push out maturities through at least 2020, the people said. The plan would call for Bain Capital LLC and Thomas H. Lee Partners -- the company’s private-equity owners -- to swap their senior debt for new obligations that come due later, the people said.
“Our operating business is strong and therefore provides us with the flexibility to manage our capital structure in a prudent manner,” IHeart spokeswoman Wendy Goldberg said. “We’re always open to constructive dialogue with our lenders as we focus on positioning IHeartMedia for long-term growth.”
Devin Broda, a spokesman for Thomas H. Lee at Sard Verbinnen & Co., and Julie Oakes, a spokeswoman for PJT at Joele Frank, declined to comment. Representatives for Bain and Jones Day didn’t respond to messages seeking comment.
IHeart, the nation’s largest owner of radio stations with 245 million monthly listeners, has $193 million in notes that mature in 2016, $230 million under a revolving credit line that’s due in 2017, more than $1 billion in obligations maturing in 2018 and $8.3 billion in bonds and term loans due in 2019, according to data compiled by Bloomberg.
The broadcaster reported net income of $938.5 million in 2007, but in each year since then it has lost between $219.5 million and $4 billion, according to data compiled by Bloomberg, partly due to interest payments on its debt from the buyout by Bain and Thomas H. Lee. Its consolidated net loss for 2015 was $737 million.
To boost its cash, IHeart has been selling off healthier assets. It raised $566 million in January by selling billboards in eight markets to Lamar Advertising Co. and other buyers. It has also been shifting assets into its Broader Media unit. The company had $773 million in cash at Dec. 31, up from $457 million a year earlier.
The cheapest of the bonds being targeted for pay down, the $850 million of 10 percent notes due January 2018, last traded at 32 cents on the dollar on Feb. 26, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.