IHeartMedia Inc., scrambling to stay current on more than $20 billion in debt, is asking bondholders of its iHeartCommunications unit to make it easier for the radio company to pursue a future financial overhaul. The stock rose to its highest level in almost two months.
IHeart wants investors to approve amendments to six sets of notes that would narrow the list of holders eligible to vote on any subsequent changes related to a debt exchange, the company said in a Nov. 28 statement. The change would allow iHeart to exclude holders who aren't institutional “accredited investors,” as well as those who aren't U.S.-based or whose inclusion would require iHeart to comply with a specific jurisdiction's securities laws, the company said. In return, iHeart would pay investors who consent as much as $8 million, with an additional $12 million if a debt swap occurs later.
“The amendment proposed in the consent solicitations would maximize our flexibility as we continue to proactively explore initiatives to strengthen our capital structure and position the company for long-term growth and success,” iHeart spokeswoman Wendy Goldberg said in an e-mail.
The solicitations expire on Dec. 7 and need majority support to pass, according to the statement. The San Antonio-based company has a coupon payment due Dec. 15 on $1.5 billion of 9% priority-guarantee notes due 2019, which are among those affected by the potential amendment. Those notes were quoted at 79.7 cents on the dollar Monday according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Shares of iHeartMedia climbed 6.4% to $1.50 in New York trading Monday, while $950 million of 10.625 percent iHeartCommunications priority-guarantee notes due 2023, which were included in the consent solicitation, jumped 1.5% on the dollar to 75.5 cents.
“One thing that was made pretty clear is that they're considering doing some sort of exchange offer,” said Bloomberg Intelligence analyst Philip Brendel. “By excluding certain holders, they may be able to avoid inconveniences and costs tied to registering new securities.”
IHeart ranks as the biggest U.S. radio station owner. Traditional broadcasters have been struggling with high debt loads and losses as online music services poach away audiences, advertisers and revenue. Ad revenue fell 3% for traditional radio stations in 2014 and 2015, while digital ad revenue grew 9% and 5% in those years, according to the Radio Advertising Bureau.
Case Dismissed
IHeart's assets include Clear Channel Outdoor Holdings, its billboard advertising business. Mario Gabelli's Gamco Asset Management, which held almost 10% of the unit's Class A shares, claimed in a lawsuit this year that iHeart executives violated legal duties to shareholders by selling assets and moving funds from Clear Channel to repay the parent company's debts. IHeart won dismissal of Gamco's case earlier this month.
IHeart is grappling with debt accumulated since 2008, when the company was acquired by private-equity giants Bain Capital Partners and Thomas H. Lee Partners. Almost $8.5 billion is slated to come due over the next three years, according to data compiled by Bloomberg.
Moelis & Co. is acting as the solicitation agent on the amendment proposal, according to the statement. IHeart has been working with Moelis and Millstein & Co. to negotiate the restructuring of its debt, while a group of creditors led by Franklin Advisers Inc. has been advised by PJT Partners Inc. and law firm Jones Day.
IHeart said in a Nov. 9 securities filing that “there can be no assurance” the company will stay in compliance with its debt covenants. A failure to meet those requirements would result in a default, the company said.
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