The Burden Of Debt Is Getting Heavier For iHeartMedia
December 22, 2016 at 4:35 AM (PT)
iHEARTMEDIA's $20.5 billion of debt is causing a new set of problems, reports MYSANANTONIO.COM, which writes, "A NEW YORK group determined that iHEARTMEDIA’s partial debt payment last week (NET NEWS 12/13) triggered repayment on financial contracts tied to the company’s bonds.
ALL ACCESS reported last week that iHEART decided to not repay the $57.1 million of the 5.50% Senior Notes due THURSDAY, DECEMBER 15th, 2016 (“2016 Legacy Notes”) held by affiliate CLEAR CHANNEL HOLDINGS, INC. ("CCH") when the notes mature on that day. The decision, made by a Special Committee of independent directors, is part of the Company’s ongoing efforts to proactively address its capital structure, while maximizing the value of its assets.
MYSANANTONIO.COM notes, "The decision will primarily affect the hedge funds and other WALL STREET investors that speculated on iHEARTMEDIA’s financial future and won’t necessarily have a big or immediate impact on iHEARTMEDIA’s books. But the decision is another marker of distress in the radio and billboard giant’s troubled finances. The struggling company has made a series of unusual maneuvers in recent months in an attempt to restructure its finances. The costs to service its crushing debt load are burning through cash as it struggles to keep up with interest payments and repay bonds as they mature. It reported its 27th consecutive quarterly loss last month."
All this comes as three major bond rating companies downgraded iHEARTMEDIA earlier this month. ALL ACCESS reported last week (NET NEWS 12/12) that iHEARTMEDIA INC.’s credit rating was cut by FITCH RATINGS on concern that, "efforts to tame the struggling media company’s debt could lead to a distressed exchange or bankruptcy." FITCH added, "IHEARTMEDIA is burning cash," which caused FITCH to drop its rating to CC from CCC. FITCH added a restructuring “is likely within a year or two,” noting, “The company has adequate liquidity to get past 2016, but it will likely need to execute on additional liquidity levers to get through 2018,” added the FITCH report, which included that, "iHEARTMEDIA should be able to meet debt payments due THURSDAY. It has about $21 billion of debt outstanding."
BLOOMBERG INTELLIGENCE Sr. Analyst covering distressed debt PHILIP BRENDEL told MYSANANTONIO.COM that iHEARTMEDIA has been “engaging in financial engineering for a while now” as the company has tried for years to figure out ways to deal with its more than $20 billion in debt. “As far as standing and credibility, this is typical with what we’ve been seeing from them, so I don’t think it moves them in a worse way from an investors standpoint,” BRENDEL said. “This is what the company’s been doing for quite sometime, really ever since the IPO.”
An iHEARTMEDIA spokesperson insists: "The ISDA ruling on Credit Default Swaps has no financial impact on iHEARTMEDIA. This has nothing to do with our 'burden of debt getting somehow heavier.'"