iHeart Media Inc. just filed for Chapter 11 bankruptcy protection on Wednesday trembling under its $20 billion in debt.
The biggest internet radio broadcaster in the United States said in a statement that an agreement was signed stating that more than $10 billion of the company's outstanding would be bought up for balancing the books and restructuring. This only halves the problem, they still have to pay the other half of the debt.
“iHeartMedia has created a highly successful operating business, generating year-over-year revenue growth in each of the last 18 consecutive quarters. We have transformed a traditional broadcast radio company into a true 21st century multi-platform, data-driven, digitally-focused media and entertainment powerhouse with unparalleled reach, products and services now available on more than 200 platforms, and the iHeartRadio master brand that ties together our almost 850 radio stations, our digital platform, our live events, and our 129 million social followers,” said Bob Pittman, Chairman and Chief Executive Officer. “The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure. Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”
The debt was taken on during the 2008 leveraged buyout and this February, iHeart missed interest payments on the pile as well as two sets of bond payments. A last-minute deal with Liberty Media, which owns SiriusXM Radio, which would have been revamped by notorious mogul John Malone and would acquire $1.16 billion for iHeart Media Inc, was dropped.
iHeart owns 858 radio stations, for example, Z100 in New York and Real 103.5 KISS FM in Chicago. They also have a digital music streaming service and live concert ventures and in addition have a 90 percent stake in the company Clear Channel Outdoor Holdings, which is a Billboard advertising company.
Their shares of Clear Channel Outdoor Holdings were not included in the bankruptcy filing, according to The Hollywood Reporter.
This was foreshadowed last year when iHeartMedia Inc., headed by Bob Pittman (from MTV fame), warned in early 2017 that it may not survive through 2018.
iHeart Media had assumed $350 million in debt in 2017, to add to the 20 billion the original leveraged buyout by Clear Channel Communications Inc of $24 billion in 2008 by private-equity firms Bain Capital and Thomas H. Lee Partners has predictably slugged iMedia down to the ground. In 2019 it will have $8.3 billion of debt in additional debt. So the prior agreement with the holders as they filed for bankruptcy is barely keeping them alive.
In 2017 iHeart Media Inc. stated to the Securities and Exchange Commission, in its filing that, “Management anticipates that our financial statements to be issued for the three months ended March 31, 2017, will include disclosure indicating there will be substantial doubt as to our ability to continue as a going concern for a period of 12 months following the date the first quarter 2017 financial statements are issued,” according to Market Watch.
The deal currently in the works is that holders who have $13 billion, would get $5.6 billion in new debt and 94 percent of the equity in a reorganized iHeartMedia and also iHeartMedia's 89.5 percent holdings of Clear Channel Outdoor Holdings.
Bain Capital and Thomas H. Lee Partners control 68 percent of iHeartMedia, stated in the company's most recent annual report, meaning they have the majority vote.
IHeartMedia started in 1972 with the purchase of KEEZ-FM in San Antonio, Texas, the location of its headquarters.
At this moment about 14,300 employees (assumedly since this is from 2016) will have a lot to stress over, in the company's recent annual report, according to CNBC.
Even with this bad news, the iHeart Rado Twitter feed is still rolling and the work it does isn't just, snap, being undone. The company may survive in one form or another, and this could be just a sink before a comeback. With its prominent presence in radio, music, and entertainment, in general, it may be too early to judge if they are down and out just yet.