iHeartMedia, America’s biggest radio broadcaster and the owner of the iHeartRadio streaming platform, has filed for chapter eleven bankruptcy protection. The media firm has been battling a massive debt load for some time, much of which stems from a so called ‘leveraged buyout’ of the company by its current owners back in 2008.
Negotiations have been underway for the best part of a year to try to restructure iHeart’s debts. When it skipped a $106 million interest payment on 1 Feb things escalated, with the company getting an automatic 30-day grace period to hammer out a deal with its moneylenders. That grace period was then extended multiple times until news of the move into bankruptcy was announced overnight.
The company is, perhaps unsurprisingly, trying to put a positive spin on the development. As it filed for chapter eleven protection, it stated that it had “reached an agreement in principle with holders of more than $10 billion of its outstanding debt and its financial sponsors”.
This agreement, it added, “reflects widespread support across the capital structure for a comprehensive balance sheet restructuring that will reduce iHeartMedia’s debt by more than $10 billion. To implement the balance sheet restructuring contemplated by the agreement in principle, iHeartMedia and certain of its subsidiaries, including iHeartCommunications, Inc, have filed voluntary petitions for relief under chapter eleven of the US Bankruptcy Code in the United States Bankruptcy Court”.
Day-to-day operations of iHeart’s radio stations or digital channels will not be affected in the short term, while the firm’s outdoor advertising business has not commenced chapter eleven proceedings at all.
Although the radio company’s mega-bucks debt pile is mainly the result of the 2008 acquisition, it has – like most media firms – been struggling to deal with the big shift to digital. Recognising that its core AM/FM radio business is facing new competition for multiple directions, it has diversified its operations online – in particular with the iHeart streaming platform – though music streaming is in itself a very risky business.
All that said, if the company can successfully navigate the chapter eleven process, and come out the other end with reduced debt obligations, that should allow the firm to focus its efforts more onto tackling the challenge of reinventing a traditional radio business for the digital age, rather than being entirely distracted by meeting the impossible costs of servicing mega-debts.
iHeart’s CEO Bob Pittman said last night: “iHeartMedia has created a highly successful operating business, generating year-over-year revenue growth in each of the last eighteen consecutive quarters. We have transformed a traditional broadcast radio company into a true 21st century multi-platform, data-driven, digitally-focused media and entertainment powerhouse”.
He added: “The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure. Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s number one audio company”.
According to Variety, among iHeart’s music industry creditors as it slips into bankruptcy are Spotify, Universal Music, Warner Music and American collecting societies BMI, ASCAP, GMR and SoundExchange.[from http://ift.tt/2lvivLP]