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iHeartMedia Chooses to Pay Its Lenders Over Itself as Debt Continues to Drag on Bottom Line
Today, a bill for $250 million in "legacy note" debt is due for payment from iHeartMedia -- but the company won't be paying itself. If that's confusing, well... it should be.
Let's back up. San Antonio, Texas-based iHeartMedia is $20.45 billion dollars in debt, which it is strategically paying off as the various due dates on the agreements mature. (Head here for a full explanation of iHeart's corporate structure and the origins of this truly massive debt load.) On Friday, $250 million "legacy notes" will come calling, $57.1 million of which iHeart owes to its own subsidiary, Clear Channel Holdings, Inc. But, in an SEC filing, the company says it will only be paying outside creditors the $192.9 million it owes them.
The company also recently announced that various lenders had agreed to take -- through a process called "consent solicitation" -- an aggregate payment $1.729 million in order to green-light a change in terms on their share of iHeart's debt, which is due for payment in 2021. The altered terms were either not made public or not yet determined. Another consent solicitation, for $2.59 million, was rejected.
Bankruptcy for the company is not off the table, nor would a significant bailout from a larger company that would seek to control a large chunk of the company. "You can assume that's certainly entered the conversation," Dave Novosel of finance analyst Gimme Credit tells Billboard. Fitch Rating Agency downgraded iHeart on Dec. 9, citing the company's debt.
iHeart has been both growing and trimming; it sold some radio towers for $369 million (and then leased them at an undisclosed rate, so its radio stations could broadcast), but it also debuted iHeartLatino, a new division, in September. A few weeks ago, it debuted its own all-you-can-eat streaming service.
The piper will truly start playing in 2019 when, according to a Bloomberg source earlier this year, $8.3 billion of senior debt will be due for repayment.
When reached for comment, an iHeartMedia rep sent this statement to Billboard: "The strength in our operating business gives us the ability to deal with our capital structure, and we are focused on taking additional steps in order to support the long-term growth of this unique multi-platform company."