iHeartMedia, Inc. is on the verge of bankruptcy. The company has been on a downward spiral for months, with investors fearing the company would have to file for Chapter 11 bankruptcy. The company’s filing is now on hold, as the company received another extension.
The company has had their forbearance extended through March 12, 2018, providing Chapter 11 bankruptcy protection. The information comes from an SEC filing.
Chapter 11 bankruptcy protection protects the company’s finances. The extension allows the media company to extend its talks with creditors and discuss a restructuring plan. The restructuring term sheet, which was filed on March 4, indicates that the company is seeking a restructuring term that would result in the company’s debtors becoming majority owners in iHeartMedia.
If an agreement is not made, the company will be in a deadlock with creditors and will likely become involved in a lengthy legal battle.
The pre-packaged agreement, as of Friday, will make Clear Channel Outdoor Holdings, the company’s billboard advertising operation, a spinoff of the company. The spun off company would be the economic interest of the company.
Debtors would also be issued new iHeart stock or a combination package of stock and special warrants.
The company has $20 billion in creditors. The company’s SEC filings show that the company is looking to reduce its debt down to $5.8 billion from $20.6 billion.
iHeartMedia’s troubles began a decade ago when Clear Channel, the company’s former entity, was purchased in a $20 billion deal. The purchase, which was all financed in loans, was nine times the company’s pre-tax cash flow. Limits of six times leverage have since been put in place by the federal government, but they are at risk of being removed under the Trump Administration.
The media company posted net losses of $300 million in 2016, with debt payments averaging $1.8 billion. iHeart missed a $100 million interest payment to creditors in February, marking the last straw for many creditors that are demanding payment.
Liberty Media has offered to provide the company with $1.16 billion to help with financing. The financing will result in Liberty Media acquiring a 40% stake in iHeart following the restructuring plan. Liberty owns SiriusXM.
SiriusXM’s main competitors are FM transmitters, but the company views terrestrial radio as its largest rival in automobiles.
iHeartMedia is one of the two largest radio companies in the United States. Cumulus Media is considered the other largest radio company in the country. Cumulus is reportedly struggling after filing for bankruptcy protection last year. The company chose to restructure its debt payments, which were too large for the company to handle.
Cumulus’ finances have seen been quiet since filing for bankruptcy protection.
The company most recently announced the end of “The Loop.” The classic rock program’s end and cease operation came as the company confirmed the sale of WLUP FM 97.9. The station was sold to the Educational Media Foundation for $21.5 million by Merlin Media. Cumulus has been running the station on behalf of Merlin since 2014.
The station will go from being a classic rock station to an adult contemporary Christian music station.