IHeartMedia, Lenders in Fight Over Disputed Share Transfer

  • Note holders file default notice for moving stock to unit
  • Radio broadcaster objects to allegations, sues creditors

A group of IHeartMedia Inc. creditors are going to battle with the debt-laden radio broadcaster over a move that the investors say weakened their claim on about $500 million of assets.

IHeart said it received notices of default from its bondholders, according to a filing Monday. The lenders claim that the company violated debt covenants by transferring the shares of Clear Channel Outdoor Holdings Inc. to its Broader Media LLC in December. The creditors represent at least 25 percent of the outstanding principal of four of the company’s priority guarantee notes.

The broadcaster, which is weighed down by more than $20 billion in debt, said it disputes the allegations and will contest the notices, according to the filing. The company filed a lawsuit Monday in state district court in Bexar County, Texas, seeking a declaratory judgment that it isn’t in default. The 15 defendants include Canyon Capital Advisors, D.E. Shaw & Co. and Franklin Advisers Inc.

On Dec. 3, IHeart gave Broader Media $516 million of common stock in Clear Channel Outdoor Holdings, the publicly traded billboard advertising company. Broader Media is an “unrestricted subsidiary” under IHeart’s priority guarantee notes. Putting new assets into Broader Media was a way to help sell additional debt, plus proceeds from the sale could be used to help retire other obligations, Philip Brendel, a senior credit analyst at Bloomberg Intelligence, wrote in a Dec. 16 note.

Buyout Bonds

Standard & Poor’s placed the company’s CCC ratings on Creditwatch with negative implications, the ratings firm said in a statement Tuesday. Moody’s Investors Service said the notice of default wouldn’t affect IHeart’s credit ratings.

“We believe our recent contribution of Clear Channel Outdoor Holdings, Inc. stock to our subsidiary Broader Media LLC constituted a permitted investment under, and fully complied with, our financing agreements,” IHeart spokeswoman Wendy Goldberg said in a statement.

Representatives for Canyon, D.E. Shaw and Franklin didn’t respond to telephone and e-mail messages seeking comment.

IHeart, the nation’s largest owner of radio stations with 245 million monthly listeners, is fighting to rein in the debt it took on in its 2008 acquisition by private equity firms Bain Capital Partners LLC and Thomas H. Lee Partners LP, a $24 billion deal that came to symbolize the excesses of the pre-crisis buyout boom. Since then, the business has become increasingly competitive as Pandora Media Inc., Spotify Ltd. and Apple Inc. have lured away millions of listeners with online radio and on-demand downloads.

Debt Wall

The broadcaster’s immediate challenge is a wall of almost $10 billion in debt that comes due in the next three years. It 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 company’s 10 percent bonds due in 2018 fell to 35 cents on the dollar Tuesday from 38 cents on March 4. Its 9 percent bonds due in 2019 slid to 71.25 cents Tuesday from 72.75 cents on March 9

IHeart reported net income of $938.5 million in 2007, but in each year since then it has lost anywhere from $219.5 million to $4 billion, according to data compiled by Bloomberg. Its consolidated net loss for 2015 was $737.5 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.

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