Creditors 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.
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.