As iHeartMedia Prices $250 Million Note Offering, Fitch Ratings Remains 'Negative'

New Name... Same Debt

CLEAR CHANNEL may have changed its name to iHEARTMEDIA, but the company is still carrying a large amount of debt from its past. FITCH RATINGS has released updated financial ratings on the company, and remains "negative" because of that debt load -- but notes "the company has adequate liquidity" to meet its obligations.

FITCH "is maintaining the 'CCC/RR4' rating on iHEARTCOMMUNICATIONS, INC.'s (formerly CLEAR CHANNEL COMMUNICATIONS, INC.) (iHEART) latest offering of $250 million of 9.0% Priority Guarantee Notes (PGNs) due 2022. The notes are being issued as part of the same series as the $750 million of PGNs due 2022 that were issued on SEPT. 10th, 2014, and rated 'CCC/RR4'. Proceeds from the offering are expected to be used to prepay $245.9 million in Term Loan B due 2016 and $4.1 million in Term Loan C due 2016 and to pay fees and expenses related to the offering."

So how much debt does iHEARTMEDIA have pending? "The Add-on PGNs are expected to share the same terms as the existing PGNs due 2022. Following the redemption, iHEART will have $916 million and $15 million in Term Loan B and Term Loan C remaining, respectively, and will have $1.2 billion in total maturities for 2016," notes FITCH. "The transaction is expected to incrementally increase total interest cost, but FITCH believes the company has adequate liquidity (including cash on hand, monetization of repurchased and outstanding notes, and asset sales) to meet its debt service obligations."

FITCH doesn't expect the debt to be paid off. Rather, they see iHEARTMEDIA will continue to refinance, noting that "free cash flow (FCF) to be negative over the next few years. The ratings and Negative Outlook reflect the limited room within the credit profile to endure any material deterioration in operations. FITCH calculates iHEART's interest coverage ratio (EBITDA/Gross Interest Expense) at 1x as of JUNE 2014, and the company paid more than $1.5 billion in cash interest on an LTM basis. FITCH does not expect a material amount of absolute debt reduction over the next several years, given the expected negative FCF. Instead, FITCH expects the company to continue to focus on extending or repaying its term loans via issuance at iHEART and CLEAR CHANNEL OUTDOOR HOLDINGS, INC (CCOH). Pro forma for the aforementioned transaction, iHEART has approximately $21.1 billion in consolidated debt (includes debt held at CC FINCO LLC). Debt held at iHEART is $16.2 billion and consists of $7.2 billion secured term loans ($931 million in 2016 and $6.3 billion in 2019); $5.3 billion secured PGNs, maturing 2019-2022; $2.1 billion in senior unsecured 12% cash pay/2% PIK notes maturing in FEBRUARY 2021 (includes CC FINCO LLC position of $423 million); $1.6 billion senior unsecured notes (including $725 million in legacy notes), with maturities of 2016-2027."

$250 Million Note Offering

iHEARTCOMMUNICATIONS, INC. has announced the pricing of a $250 million offering to "qualified institutional buyers" of new 9.0% Priority Guarantee Notes due 2022, setting them at a price of 101% of their principal amount plus accrued interest from SEPTEMBER 10th.

The new debt is being guaranteed on a senior secured basis by parent iHEARTMEDIA CAPITAL I, LLC.

The company plans to use the net proceeds to prepay at par $245.9 million of its term loan B facility and $4.1 million of its term loan C/asset sale facility, plus accrued and unpaid interest on those loans, including prepayment.

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