IHeartMedia Mulls Ending Debt Talks With Franklin-Led Group

  • Franklin Advisers has been leading debt negotiating group
  • Company faces $10 billion in debt payment in three years

IHeartMedia Inc. said it may break off negotiations on restructuring some of its $21 billion of debt after failing to reach an agreement with some of its creditors.

The biggest owner of radio stations in the U.S., formerly known as Clear Channel Communications Inc., is assessing whether it will continue discussions “given the significant gap between the proposals,” the company said in a statement on Tuesday. 

Franklin Resources Inc.’s subsidiary Franklin Advisers Inc. is the biggest holder of iHeart’s $6.3 billion of term loans and has been leading the discussions, according to a person with knowledge of the matter, who asked not to be identified because the talks are private. The group of holders last month lost the suit against iHeart, claiming the company was in default due to a $100 million of stock transfer between subsidiaries. Stacey Coleman at Franklin Resources declined to comment.

IHeart has been looking to push out maturities on its debt and reduce its interest expense, people familiar with the matter said in March. But no agreement has been reached and there’s no guarantee that it will get done, the company said in the filings.

LBO Legacy

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. Much of these obligations were accumulated as part of a leveraged buyout by Bain Capital LLC and Thomas H. Lee Partners in 2008.

"We continue to evaluate various opportunities to strengthen our capital structure for the benefit of our stakeholders, and we remain focused on positioning iHeartMedia for long-term growth," said Wendy Goldberg, a spokeswoman at iHeartMedia.

Holders of iHeart’s $6.3 billion term loan offered to cut the interest rate and extend the maturity by a year to 2020 in a proposal submitted on June 22, according to the filings. In return, they asked for amendments ensuring that their investments will be paid back in whole if iHeartMedia fails to pay some of its unsecured bonds, including those due in 2018.

The $850 million of 10 percent senior unsecured bonds maturing January 2018 last traded at 52.5 cents on the dollar at 15:18 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Counter Proposal

IHeartMedia countered with a proposal on Monday, saying the interest-rate cut needs to be at 75 basis points before it would agree to the make-whole requirement lenders asked for, according to the filings. The loans currently pay at least 675 basis points above the benchmark rate, according to data compiled by Bloomberg.

The disclosure of the confidential proposals details allows the creditors involved in negotiations to trade the securities, a process known as “cleansing.”

The creditor group is advised by PJT Partners Inc. and law firm Jones Day, while the company is represented by Millstein & Co. and Moelis.

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