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iHeartMedia Bankruptcy Delayed 2 Days, $15B Debt Erased

Money on fireCreditors gave iHeartMedia a bit more time to work out an orderly bankruptcy plan. America's largest broadcast radio owner has until 11:59 PM Wednesday to agree with creditors on a reorganization plan, according to documents filed Monday.

A new proposal filed with the Securities and Exchange Commission Monday would reduce iHeartMedia's  debt from $20.6 billion to under $5.8 billion as part of a Chapter 11 bankruptcy reorganization plan.  As part of the deal Clear Channel Outdoor Holdings, iHeart's billboard division, will be spun off. Bond holders will receive both stock in Clear Channel and equity in the newly recapitalized iHeart.

iHeart owns 855 radio stations in the US, as well as,  multiple popular streaming channels.

Liberty Media?

It is unclear if the the recapitalization is coming from creditors or from Liberty Media.  Last week, Liberty Media and its SiriusXM division offered to infuse $1.158 billion into iHeartMedia to see it through the bankruptcy in exchange for a 40% stake. Liberty has also bought a substantial position in iHeart debt and sees synergies between iHeart and SiriusXM radio, according to Bloomberg
How Did iHeartMedia Get Here?

The fall of iHeartMedia began in 2008  when private equity firms Bain Capital and Thomas H. Lee Partners bought what was then Clear Channel and financed the $20 billion deal with loans equal to 9 times the company’s pre-tax cash flow. That's 50% higher than the 6X leverage limit  set by the federal government in 2013.  The Trump administration has said that they will remove all such limits soon.

Since then, iHeart has struggled. In 2016, the company's  net loss was about $300 million including $1.8 billion in debt payments.  So a managed bankruptcy with lower debt payments could make the media giant a viable company again. That appears to be the goal as major creditors and iHeart execs huddle to prepare to file court papers, likely early this week, according to multiple reports.