$20 Billion In Debt… Is iHeart Media Going Broke?

$20 Billion In Debt, iHeartMedia Still Fights Off Forced Bankruptcy For Now

iHeartMedia Inc., the largest owner of U.S. radio stations and popular music streamer, has still managed to secure a temporary restraining order from a state court in Texas, blocking bondholders from declaring the company in default.

iHeartMedia, formerly known as Clear Channel, recently revealed in regulatory filings that the State District Court in Bexar County, Texas, had issued a restraining order after lenders issued default notices to iHeartMedia creditors, claiming the company had violated lending covenants when they transferred 100,000,000 shares of Clear Channel Outdoor to its Broader Media LLC unit in December, Bloomberg reported. The restraining order provides iHeartMedia little more than a week of relief from default notices, with an option to extend for another 14 days. In their regulatory filing, iHeartMedia said, “We continue to believe that the Contribution did not cause a default under any of the Indentures or under the terms of any of our other indebtedness. If, however, we are unable to obtain the permanent relief we are requesting from the Court or are otherwise unable to successfully contest the validity of the Notices and any subsequent acceleration of a material portion of our indebtedness, then we would need to pursue other available alternatives to address the claimed defaults.

iHeartMedia, which owns over 840 radio stations and boasts more than 110 million weekly listeners, is currently encumbered with more than $20 billion in debt, and is seeking to restructure itself.

The business was bought by Bain and Thomas H. Lee in July 2008 in one of the last mega leveraged buyouts before the credit crisis. The firms paid $24 billion for the radio and billboard company that spawned IHeart, formerly known as Clear Channel Communications Inc. and has been battling ever since under the debt taken on for that deal.

According to sources, iHeartsMedia’s proposed plan to shift assets and reduce the mountain of multi-billion-dollar debt may be done by way of discussing plans with its private equity owners to offer existing debtholders the option to exchange into new obligations from a subsidiary called Broader Media LLC. Creditors would receive higher-ranked claims on some of IHeart’s assets than they have now.

One can only wonder how the company, which is carrying more debt that the city of Detroit, was able to get in debt so deeply? How is a company that has more debt than total annual radio revenue justifying awards shows, festivals and lavish company conventions in Las Vegas?