Yesterday’s flurry of financial activity and lawsuits all has to do with legacy notes and a disagreement over a Springing Lien. On Tuesday, iHeart announced an independent special committee decided not to repay $57.1 million in legacy notes due on Thursday that are being held by Clear Channel Holdings. iHeart has $725 million in legacy notes: $250 million of 2016 legacy notes, $175 million of 2018 legacy notes and $300 million of 2027 legacy notes. When you back out the $57.1 million in legacy notes held by CCH, there is $192.9 million due on December 15, which iHeart intends to pay.
iHeart has filed a lawsuit in Texas to try to resolve a disagreement creditors are having over whether a Springing Lien should be triggered. If the amount of legacy notes drops below $500 million, the lien would be triggered. So in order to keep the legacy notes above $500 million iHeart announced the plan not to repay the $57.1 million to CCH. CCH has advised iHeart that it did not intend to pursue remedies in relation to the outstanding 2016 legacy notes and iHeart will continue to pay interest on those notes.
In the court filing obtained by Reorg Research, the company describes “competing and mutually exclusive demands from different categories of stakeholders.” The complaint pits the debtholders who would obtain additional collateral in the event of a springing lien against those who wouldn’t. iHeart says the disagreement puts the company “between the proverbial rock and a hard place.”
Sarah Gefter (pictured) is the Director for U.S. Credit at Reorg Research, a financial media outlet focused on the distressed and event-driven sectors. Gefter tells Radio Ink, “This move by iHeart is something of a preemptive tactic attempting to stem potential litigation with creditors that could arise as a result of granting certain creditors springing liens. At the same time that the company is seeking to solidify its view that its 2016 notes remain outstanding and no springing liens have been triggered — having already filed a petition in a Texas court — it also acknowledges the disparate views of various creditors and the likelihood of litigation.”
The petition seeks a declaration by the Texas state court that the $57.1 million of legacy notes due 2016 held by CCH, are outstanding and will remain outstanding until they are canceled or repaid; and the company will not be obligated to grant the “springing lien” to certain holders of the debt and will not be obligated to do so unless and until 60 days after there is an additional repayment or cancellation of legacy notes so that the amount of legacy notes outstanding falls to $500 million or less.
In the suit, iHeart says “this controversy is imminent, and is not speculative or hypothetical.”
The lawsuit iHeart filed, which you can read HERE, is against U.S. Bank, Wilmington Trust, and Citibank. Read the iHeartmedia 8K filing HERE.
Bobby Pittman to his credit is like Ringlimg Brothers Circus – the greatest show on Earth! The only problem is, once you get beyond Pittman’s telling you how great Iheart is, there’s nothing there. Bob Pittman in 7 years as the boss of Clear Channel/iHeart hasn’t made one dime in profit for the company!! Not a dime. And there’s no profit in sight. Yet, Bain Capital is ok, because they’re making hundreds of millions of dollars a year in interest, and eventually they will get a huge tax break when they write off the 20 billion or so that Clear Channel is never going to be able to repay. Pittman and his many VP high-paid suits that he’s brought in, will all be ok with their golden parachutes, and Pittman will be able to buy the top iHeart/Clear Channel stations for pennies on the dollar when iHeart goes bankrupt. … Yes, this IS the greatest show… correction, make that the greatest CON…on Earth!!!
Sorry, Robert.
iHeart (and others) already have all the answers. Further commentary is neither necessary, welcome or requested.
But, thanks for comin’ out.
The reason the Radio and Media business sometimes gets a bad name is because of Companies like
IHeart…They need to be broken up and sold to real credible broadcasters!!