It’s certainly a complicated scenario the financial minds at iHeart have put together, but the goal is to try to put the company in a much better financial position moving forward. And if one scenario is approved, Clear Channel Outdoor will be separated from iHeartMedia.
iHeart has put three possible scenarios on the table to reduce debt and lower interest payments. What lenders get in return will all depend on how much they participate in this plan. They will have three options to choose from.
iHeart is calling the three options “High Participation,” “Mid Participation,” and “Low Participation.” The high-participation scenario would benefit the company’s financial situation the most. That’s the scenario that would result in iHeart’s separating Clear Channel Outdoor from the media business.
If participation is high, lenders would receive shares of a new company called CCO Holdings. iHeart would give lenders up to a 49% economic interest in the new company and up to a 19% voting interest. Lenders would also receive warrants to purchase shares of iHeartMedia that would give them up to a 49% financial stake, but no voting interest.
So what exactly is “High Participation”? According to the company, that will happen if the level of participation by holders of existing notes and the level of participation by eligible lenders under the existing term loans in the term loan offers together generate sufficient reductions in the principal amount of iHeart’s debt, a sufficient reduction in interest payments, and sufficient extensions to the maturities of debt to enable the iHeart board to determine there are no legal restrictions on its ability to declare a dividend of all of the outstanding shares of CCO Holdings that it owns.
In the Mid Participation Scenario and the Low Participation Scenario, the media and outdoor businesses will remain subsidiaries of iHeartCommunications. More details on the threshold for each of those two scenarios can be found in iHeart’s latest 8K filing with the SEC HERE
iHeart has been working at reducing its $20 plus billion in debt, as it continues to improve its top line. The company reported its Q4 earnings in February and has now turned in 15 consecutive quarters of year-over-yaer revenue growth.
It is amazing that Pittman and iheart/clear channel are trying to control the options for the creditors and lenders. iHeart/clear channel owes the 20 billion, and you would think that the creditors and lenders would establish the repayment terms, not the debtor. Then again, iheart/Clear Channel can hold the threat of bankruptcy over the lenders. In any event, the sooner that this cancer to the radio industry called iheart/clear channel goes away, the better for the industry as a whole. Real genuine radio operators will be able to get back in the game, commit real resources (not voice tracking and all the other cost-cutting gimmicks that Pittman and Clear Channel use) and actually operate the radio stations responsibly, and as real well-run local radio stations.