What: iHeart Media has filed for bankruptcy along with some of its units.
Why it matters: The company reached an agreement with holders of more than US $10 billion of its outstanding debt for a balance sheet restructuring.
IHeartMedia Inc has filed for Chapter 11 bankruptcy as the largest U.S. radio station owner reached an in-principle agreement with creditors to restructure its overwhelming debt load.
The company, which traces its roots to the 1972 purchase of KEEZ-FM in San Antonio, Texas, where it is currently headquartered, filed for bankruptcy along with some of its units and said it reached the agreement with holders of more than $10 billion of its outstanding debt for a balance sheet restructuring, which would reduce its debt by more than $10 billion.
“The agreement is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” said CEO Bob Pittman.
IHeartMedia, which has struggled with $20 billion of debt and falling revenue at its 858 radio stations, said cash on hand and cash generated from ongoing operations will be sufficient to fund the business during the bankruptcy process.
The filing comes after John Malone’s Liberty Media proposed on Feb. 26 a deal to buy a 40 percent stake in a restructured iHeartMedia for $1.16 billion, uniting the company with Liberty’s Sirius XM Holdings satellite radio service.
Clear Channel Outdoor, a subsidiary of iHeartMedia and one of the world’s largest billboard companies, and its units did not commence Chapter 11 proceedings.
IHeartMedia skipped a $106 million interest payment on Feb. 1, triggering a 30-day grace period during which the company has tried to hammer out a deal with it bondholders.
The company disclosed on Monday it was still exchanging proposals with its creditors, but had yet to reach an agreement.
Its most recent proposal would have given holders of secured loans, who are owed nearly $13 billion, about $5.6 billion in new debt and 94 percent of the equity in a reorganized iHeartMedia. These creditors also would have received iHeartMedia’s 89.5 percent stake in Clear Channel Outdoor Holdings.
Bain Capital and Thomas H. Lee Partners control 68 percent of the voting stock of iHeartMedia, according to the company’s most recent annual report.
The private equity firms led a $17.9 billion leveraged buyout of what was then Clear Channel Communications Inc in 2008, just as the buyout boom was fading and as the signs of the financial crisis began to emerge.
Shares of iHeartMedia lost three-quarters of their value in the second half of 2015 and have never recovered since then. On Monday, the pink sheet stock closed at 48 cents.[Information by CNBC]