IHeartMedia Inc., the biggest U.S. radio broadcaster, filed for bankruptcy with a plan to ease its debt load of more than $20 billion after almost a year of fractious negotiations with creditors.
The company, with about 850 radio stations and 17,000 employees worldwide, filed for Chapter 11 protection on Wednesday in Houston to keep operating as it tries to work out a way to turn the business around and pay its debts.
After trying to ink a deal with creditors since last March, the company said in a statement that it reached an agreement in principle with investors holding more than $10 billion of its debt, along with its private equity owners. The pact, intended to give the company a framework for a speedier reorganization, would cut iHeart’s debt by more than $10 billion, it said.
Among the company’s creditors is billionaire John Malone’s Liberty Media, which controls satellite radio giant SiriusXM. Liberty Media accumulated a position in iHeart’s debt in recent months in an effort to grab a stake in the company’s radio business.
Struggling Against Spotify and Sirius
About 265 million people in the U.S. still tune in to iHeart’s stations at least once a month, but newer media such as Spotify’s streaming service and SiriusXM’s satellite broadcasts have cut into the audience and put a damper on sales. IHeart, led by Chief Executive Officer Robert Pittman, countered with its own streaming services and a live-events business offering concerts and awards shows.
The debt has been a drag on those efforts, and iHeart hasn’t posted an annual profit over the past decade. Much of the borrowing has its roots in the leveraged buyout staged by Bain Capital and Thomas H. Lee Partners in 2008.
IHeart’s traditional businesses—the radio stations and the Clear Channel Outdoor billboard unit—still contribute the bulk of its revenue. The Chapter 11 filing didn’t include the billboard unit.
Yearlong Standoff
The bankruptcy caps a yearlong standoff with lenders and bondholders on its latest debt-cutting plan. The deadline was extended more than 20 times as negotiators exchanged proposals and iHeart sweetened the terms. The current attempt at an accord followed at least a dozen debt revisions over the past decade.
Equity stakes had been a key sticking point in recent talks, with creditors demanding almost all of iHeart and 100% of its healthy Clear Channel unit. Malone’s Liberty Media sought to break the logjam late in February by offering new capital and loans in return for a 40 percent stake. JCDecaux SA, the world’s biggest outdoor-advertising agency, also has expressed interest in buying some of Clear Channel’s assets.
