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.
SiriusXM To The Rescue?
Last week, Liberty Media and its SiriusXM division offered to infuse $1.158 billion into iHeartMedia to see it through the bankruptcy in exchange for a major stake. Thus far, creditors appear to have rejected the terms of the offer; but talks are reportedly ongoing.
Liberty has also bought a substantial position in iHeart debt and sees synergies between iHeart and SiriusXM radio, according to Bloomberg.