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iHeartMedia Wins Court Case Over Stock Shuffle Designed to Deal with Its Massive Debt

iHeartMedia 2016
Kristoffer Tripplaar

A logo sign outside of the headquarters of iHeartMedia, Inc. in San Antonio on Sept. 8, 2015. 

iHeartMedia, the nation's largest radio broadcaster and an outdoor advertising giant, has bought itself more time to deal with its $20 billion-plus debt load.

As the San Antonio Express-News reports (the company is based in that city), Judge Cathleen Stryker ruled in favor of the media company, which was brought to court on the transfer of 100 million shares -- valued at over $500 million -- from Clear Channel Outdoor Holdings to another subsidiary, Broader Media, LLC. Bond holders argued the transfer would have a negative financial impact on them. The transfer was a complicated corporate shell game designed to allow it to issue new debt on those shares, and buy back older and more expensive debt at a lower rate.

iHeart said in a statement at the time of the stock shuffle that it believed the transfer was compliant with the financing agreements. It went on to state its operating business allows for “the flexibility to manage our capital structure in a prudent manner” as the company continues to evaluate ways to improve its balance sheet.

Numerous reports explain how iHeart has restructured and refinanced debt in order to move back maturity dates. In the next three years, almost $1.4 billion of debt will mature, according to iHeart’s latest investor presentation.

In April, director Julia B. Donnelly exited the board of iHeartCommunications. A company spokesperson said at the time that Donnelly's resignation had nothing to do with the current debt issues. Donnelly was replaced by Laura A. Grattan, a director at Thomas H. Lee. Grattan was also named to the board of managers of iHeartMedia Capital I, LLC, the direct parent of iHeartCommunications, as well as the board of directors of iHeartMedia, Inc., the indirect parent of iHeartCommunications.

 

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