iHeartMedia Beyond Borrowed Time

3/15 Update: Today iHeartMedia filed for Chapter 11 bankruptcy protection, after coming to a deal with a viable cross-section of its creditors to wipe some $10 billion in debt off of its balance-sheets…leaving the “restructured” company with about $10 billion left to pay down. Some creditors, who hold eight to nine figures of this debt, will be wiped out, but it’s too early in the process to tell just who will get screwed the most. Just today, iHeart tendered nearly 20 filings with the U.S. Bankruptcy Court in Texas’ Southern District – and those to whom the company owes money, as well as other interested players looking to intervene, have filed another 70+, suggesting this process will not be smooth nor speedy. [Original post follows below.]

What a strange way to go bust. After spending years telling the public that all was well – consolidation, automation/syndication, and cost-cutting was “good for radio” and tens of billions of dollars of debt was of little to no concern – Clear Channel iHeartMedia is finally preparing to pay the piper.

On February 1, the nation’s largest radio broadcast conglomerate welshed on a $106 million dollar interest-payment, triggering a 30-day countdown to default. As the clock ran down, on March 1 the company also skipped an additional $138 million in interest-payments, all in the hopes of forcing its creditors to the table to hammer out a soft landing in Chapter 11 bankruptcy, similar to what Cumulus Media did late last year (though Cumulus was only in one-tenth the debt that iHeart is, and Cumulus’ reorg-timetable has also hit some snags).

In between skipping these payments, iHeart tendered a restructuring offer to its lenders that seeked to reduce the company’s total debt from nearly $21 billion to $5.5 billion, all of which would be expected to be repaid over five to seven years. In exchange, “senior lenders” would receive an 89.5% equity share in the company, including 100% ownership of Clear Channel Outdoor – the most healthy division in the iHeartMedia constellation, and the one that iHeart itself’s been drawing money from over the last few years in order to juggle its crippling debt. Bain Capital – the private-equity firm which more than doubled iHeart’s debt when it took the company private in 2008, setting it up on the crash-trajectory it faces now – would walk away with less than 2% of the restructured company. Read More

FCC Getting Shady With Anti-Pirate Enforcement?

When it comes to pirate-hunting, the FCC’s off to a relatively sedate start in 2018. The total number of enforcement actions reported so far for January stands at 15, which is six more than were reported in 2017, but equal to the number reported in 2016, the final full year of previous (Democratic) chairman Tom Wheeler’s tenure. So far this month there have been eight actions, as opposed to 11 in February 2017 and 12 in February 2016.

Many of these cases originated last year. The most notable at present is the case of “Gerlens Cesar,” who was sent a Notice of Unlicensed Operation earlier this month for operating four pirate stations on two FM frequencies in Boston and its surrounding suburbs. Interestingly, a principal by the name of “Cesar Gerlens” has already run afoul of the FCC – having received multiple visits and warning-letters in the latter half of last year – some of which named additional collaborators – for operating unlicensed stations in the Boston area.

I e-mailed the chief of the FCC’s Enforcement Bureau, Rosemary Harold, to ask about this apparent discrepancy: had the agency mistakenly transposed the first and last names of the principal in this case, or are there two distinct individuals who just happen to share identical name-elements working in Boston? So far, no response, but also no correction from the agency. In any case, Cesar Gerlens/Gerlens Cesar seems a likely candiate for a negotiated forfeiture-settlement similar to the one worked out with a prolific pirate in Florida last moth, if/when the agency consolidates the information gleaned in this case. Read More

iHeartMedia Bankruptcy Reorganization Imminent

After spending several years shuffling money between subsidiaries (including creating new ones to raise/preserve capital) and playing footsie with creditors holding more than $20 billion dollars of its debt, iHeartMedia, the nation’s largest radio conglomerate, skipped a scheduled $106 million interest payment on some of its loans earlier this month, triggering a 30-day default-clock. iHeart is portraying this move as something done to increase its leverage over creditors, who might be compelled to agree to new terms and avoid restructuring – but this is precisely what tripped Cumulus Media into Chapter 11 bankruptcy late least year.

None other than the Wall Street Journal calls what’s likely to happen between now and March 3 a “costly reckoning.” If iHeart follows the Cumulus bankruptcy model, preferred (institutional) investors will get a greater share of the restructured company, while others will lose everything. The firms who took iHeart private last decade may not be compensated at all in restructuring, but the WSJ reports that they’ve already “managed to offset virtually all of the potential loss of iHeart’s equity,” and will generally be able to walk away after more than doubling the company’s debt in the buyout process. Read More

HD Radio Still in Stasis, But Has New Friend at FCC

2017 came and went with no great movement in the HD Radio space. According to FCC records, fewer than 2,000 FM stations have received authorization to broadcast in HD, which represents an adoption rate of 15% – a number that has not changed significantly during this decade.

On the AM side, although some 240 stations (5%) are authorized to broadcast in HD, this curated list shows that about half of them have abandoned the protocol. Penetration of HD receivers into the automotive space remains at just under half of all new cars sold in the United States and there’s still no meaningful market for non-automative portable receivers.

Yet the broadcast industry would rather you believe that HD is thriving. A new “e-book” from the folks at Radio World, New Directions for HD Radio, contains useful information about ways to optimize the system, including making sure that the analog and digital signals are properly time-aligned, the necessity of seamless audio processing across the airchain, and National Association of Broadcasters effort to standardize the broadcast of metadata on HD signals. One would think those core operational principles would’ve been hammered out nearly twenty years ago when the technology was first authorized for deployment, but it was more important to the industry to make a digital beachhead on the airwaves than it was to deploy something that worked out of the box. Read More

Coloradans Push Back Against Anti-Pirate Bullying

FCC Commissioner Mike O’Rielly doesn’t seem to be getting the kind of publicity he hoped for after taking a hyperlocal news outlet in a suburb of Boulder, Colorado to task for reporting on the existence of a pirate radio station there. The Longmont Observer ran a short piece back in December noting the existence of Green Light Radio, the FCC’s protocol for shutting such stations down, and ending with the statement, “In the meantime, enjoy Longmont’s pirate station while it lasts.”

This stuck in O’Rielly’s craw so badly that he penned a letter to the editor of the Observer admonishing it for providing “tacit support” to an unlicensed broadcaster. In O’Rielly’s mind, the Observer’s journalists should have acted as freelance FCC agents and not only reported the station to the agency’s field office in Denver, but encouraged readers to not listen to “KGLR,” due to the supposed “harm” it would cause.

A follow-up article in the Boulder Daily Camera newspaper (and its Longmont affiliate, the Times-Call) seems to suggest that Coloradans don’t appreciate O’Rielly’s scolding. According to Brooke Ericson, O’Rielly’s chief of staff (who, incidentally, has been in the job for less than four months and most likely ghost-wrote the letter to the Observer to score points with her new boss), this was “the first article (he) has come across that appeared to actively promote this illegal activity,” and thus justified a response. Read More