iHeartMedia’s debt woes seem to be getting worse these days. On top of being $21 billion in debt, the company has 60 days to pony up $6 Billion in loans. iHeartMedia’s creditors which include, Canyon Capital Advisors, D.E. Shaw, Davidson Kempner, and Franklin Advisors, are demanding that iHeartMedia pay up, or things could get really ugly.
More than $6 billion in loans from a $21 billion debt is owed to creditors, and the lenders claim that iHeartMedia tripped loan covenants when the company moved stock outside the reach of the lenders. iHeartMedia’s CEO Bob Pitman obtained a temporary restraining order against the debtors, claiming that it did not breach it’s agreement. Formerly known as Clear Channel, The San Antonio based iHeartMedia owns 850 radio stations throughout the country, making them the No. 1 radio company in the nation.
iheartMedia was taken over by private equity firms Thomas H. Lee Partners and Bain Capital in 2008. The deal was for $28 billion in buyouts when the market was stable, but the company has struggled since then due to the debt market being at it’s worst since the recession.
According to the New York Post, iHeartMedia’s debt woes put them in a tough spot.
“The PE firms have succeeded in continually amending the balance sheet to extend the still $21 billion of debt, but now with the debt markets being as bad as they were during the recession, the firms find themselves in a tough spot.”
To make matters worse for iHeartMedia, the company stands to lose $80 million by next year. The New York Post also claimed through one of the creditors that “They are forcing iHeartMedia to get a [complete] debt exchange done.”
iHeartMedia recently sold several outdoor billboard markets to Lamar Advertising in January for a total of $459 million, which the owners may have to pay from a dividend of that sale to pay off senior creditors and extending their loans in return with a higher interest rate. In exchange, iHeartMedia may have to give up about 25 percent of the business in order to forgive $2 billion in debt that they already owe.
In a December 2015 article posted by the New York Post, senior lenders did not want to spend more money on iHeartMedia smaller debts.
“Senior lenders, who are likely to get paid in full in any restructuring, do not want to see the company spend more money paying junior lenders or covering the $80 million cash flow shortfall iHeart is projected to lose next year — $120 million in 2017.”
iHeartMedia will most likely post a net loss after paying it’s debts. “It [iHeartMedia] likely wants to convert most of its $2.4 billion in unsecured debt into equity, which would lower its interest payments. That would change the net loss to a profit” quoted the New York Post.
iHeartMedia has the largest reach in the nation with TV and radio. They own 850 full power AM and FM radio stations, which boast 245 million listeners monthly. iHeartMedia acquired radio stations from companies such as Viacom, The Ackerly Group, and XM Satellite Radio, before the company merged Sirius Satellite Radio to become Sirius XM. iHeartRadio at one point owned more than 40 television stations.
On top of Radio and TV, iHeartMedia also owns outdoor billboard advertising, operating over 500 digital billboards in 32 markets. The company also utilizes posters, street benches, mobile/transit systems, and spectacular advertising such as Times Square in New York City.
iHeartMedia also owns Mediabase, a company that provides music charts for songs and tracks that have the most spins played on radio stations. Most stations that use Mediabase are owned by iHeartMedia. However, other companies have used Mediabase, and countdown shows such as ones produced by Premiere Radio Network will use the Mediabase charts for their own shows.
[Header photo by Kevin Winter/Getty Images for iHeartMedia]