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

Stations Without Studios

The Federal Communications Commission has voted along party lines to repeal the main studio rule, which required all broadcast and television stations to have a physical presence in the communities to which they are licensed. This will only serve to heighten trends of consolidation, automation, and syndication that have afflicted the broadcast industry since the passage of the Telecommunications Act of 1996.

Even in current practice, the main studio rule was not that robust. Pre-’96, when meaningful caps on broadcast ownership existed, most stations save those who were clustered (that would be four at max for radio) had their own studios, offices, and transmission facilities. In a very important sense, this meant that there was more physical redundancy to the broadcast infrastructure in any given community.

Since 1996, most station-clusters don’t even have separate studios for every station; some stations are literally nothing more than computers tucked away, maintained and updated remotely, that feed their programming to a tower that nobody in the building knows quite where it’s located. Were you to visit a radio station today, you’d most likely find a receptionist, a manager or program director, some sales staff (though these positions are often combined), and perhaps a handful of talent with duties spread across multiple radio outlets. Read More

Big-Fish Radio Capital Shaky in 2017

The second fiscal quarter’s come and gone, so it’s worth reviewing how the first half of the year’s played out for radio’s big-fish investment-games:

Clear Channel iHeartMedia: The #1 radio conglomerate in the country just extended its long-term debt refinancing offer to reluctant bondholders for the twelfth time. While going through those motions a key coalition of creditors — who hold more than 10% of iHeart’s $20+ billion debt – have been mulling over the implications of tipping the company into Chapter 11 bankruptcy.

Apparently, they’ve devised a plan by which if they’re given 49% of the company’s equity and more favorable debt-repayment terms, they’ll keep the debt-refinance shuffle going. After missing a full payment in 2016 the company ponied up on schedule this summer toward debt due in 2021. More than $8 billion comes due in 2019. Read More

More Radio Industry Market-Maneuvering Afoot

Although iHeartMedia’s dance with bankruptcy is widely seen as a key indicator of the health of the radio industry more broadly, that company is not alone in reconfiguring its approach to finance capital. Two other conglomerates are also making moves — one trying to leave the stock-trade behind while another wants to jump back into those waters.

First up is Emmis Communications: the Indianapolis-based company has been hammered in the stock market over the last few years, threatened with delisting by NASDAQ after its stock dropped below $1 per share in 2015. After conducting a reverse-stock split earlier this year (reducing the number of shares in circulation, thereby inflating the price of remaining shares) which brought the company back into compliance, company founder and CEO Jeff Smulyan has announced a $46 million bid to take the company private. Read More

iHeartMedia Facing Reorganization Pressures

Much interesting news on the iHeartMedia front already in the new year. The wildly overleveraged conglomerate ended 2015 with an announcement that it hoped to convince some of its shareholders to swap debt they hold against the company for stock. It’s assumed iHeart is still on track to try and float this proposal later this spring.

However, it would seem that some shareholders would like to take matters into their own hands. Just days after iHeart announced its swap-plan, the New York Post reported that several large stockholders planned to pressure the company to devote nearly $200 million this month toward debt reduction. This would shave off less than 1% of the $21+ billion the company owes, though it would be a small step toward ameliorating what one unnamed banker calls “clearly not a sustainable capital structure.” Read More