iHeart Lenders Said to Oppose Exchange Offer in Messy Debt Saga

  • Move is part of company efforts to address $21 billion in debt
  • Creditors holding out for better terms to exchange 2018 notes

iHeart Radio Betting on Spotify-Like App

A group of bondholders is planning to reject iHeartMedia Inc.’s latest effort to push out maturities in a setback to the biggest U.S. radio operator teetering under $21 billion in debt, according to people with knowledge of the matter.

Almost half the holders of $347 million of bonds coming due in just over a year have banded together to oppose the debt exchange offered by the company, said one of the people, who asked not to be identified as the information isn’t public. The unsecured creditors intend to notify the company that they won’t take part in the bond swap that would deliver so-called priority-guarantee notes maturing in 2021 to the holders, the person said. The group is working with law firm Paul Weiss and plans to push for better terms.

IHeart spokeswoman Wendy Goldberg declined to comment. A representative for Paul Weiss didn’t immediately respond to messages seeking comment.

The latest discord presents another roadblock in the radio broadcaster’s attempt to address a mountain of borrowings heaped on it from a 2008 buyout by Bain Capital and Thomas H. Lee Partners. The debt-load has complicated Chief Executive Officer Bob Pittman’s attempt to win back audiences who have been lured away by online music-streaming providers such as Spotify.

Surprise Move

The company has been pulling all levers to clean up its balance sheet, including a rare maneuver to forgo repaying a portion of debt held by its subsidiary. That surprising move irked some creditors and triggered payouts on $749 million of credit-default swaps.

The company is offering new 11.25 percent notes that will be added to existing priority-guarantee 2021 notes that were sold in 2013, the San Antonio-based company said on Dec. 20. The offer from iHeartCommunications Inc. expires on Jan. 19, and excludes $503 million of 2018 notes held by two iHeart subsidiaries, both of which plan to participate in the exchange.

External bondholders should seek clarity on whether any of the $503 million held by iHeart entities has been moved to restricted subsidiaries, Covenant Review analyst Anthony Canale wrote in a report Friday. The location of those notes is “critical to understanding the company’s incremental secured debt capacity,” and if they’re held by a restricted entity the company may maintain the ability to incur more secured debt, Canale wrote.

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