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

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

Cumulus Goes Chapter 11; How Long for iHeart?

Bloated with more than $2 billion dollars in debt racked up in the wake of the late 90s-early 00s radio station consolidation orgy, Cumulus Media has finally taken the plunge into Chapter 11 bankruptcy reorganization. The path from there to here began when Cumulus hired Mary Berner as the CEO in 2015 – primarily for her prowess in shepherding Reader’s Digest through the Chapter 11 process back in 2009, when that company carried a nearly identical amount of debt.

Things got real back in September, when the Wall Street Journal reported that the company had begun negotiations with creditors who hold “big chunks” of the company’s debt. This was prompted in part by the company’s pending delisting from the NASDAQ stock exchange after CMLS shares trended below $1 and stayed there; the company’s net equity had previously fallen below the NASDAQ minimum, which is also a delistable event.

Then Cumulus intentionally skipped a $23 million interest-payment on its debt that was due November 1. It told the Securities and Exchange Commission it did this “in support of the Company’s efforts to develop and implement a restructuring that will allow the Company to continue its operational and financial momentum,” and noted that the missed payment would trigger a default after 30 days.

In a memo to staff, CEO Berner was frank about the fact that “we can’t fully turn the company around until we reduce our excessive debt-load,” and that skipping the payment would incentivize creditors to compromise to avoid default. 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