Legacy Noteholders File 'Adversary Complaint' Against iHeartMedia

More Drama

Some of iHEARTMEDIA's creditors have filed an adversary complaint against the company seeking secured status in the bankruptcy filing.

WILMINGTON SAVINGS FUND SOCIETY, as trustee on behalf of holders of iHEART's 6.875% Senior Notes due 2018 and 7.25% Senior Notes due 2027, filed suit on WEDNESDAY (3/21), terming the notes "the only class of debt in the Debtors’ capital structure that was issued prior to the disastrous 2008 leveraged buyout" and asserting that the legacy note holders agreed to be unsecured "but only subject to a clear right, spelled out in the indenture, to be equally and ratably treated with any future secured debt."  The adversary suit alleges that iHEART "engaged in a series of secret and deceptive transactions that provided Mortgages... for the benefit of holders of Priority Guarantee Notes, which were both hidden from and denied to the Legacy Noteholders."  Specifically, the suit alleges that iHEART kept secret a provision in the mortgages that gave the Priority Guarantee Note holders a lien on substantially all of the company's assets, which, the plaintiff claims, should have triggered the elevation of the legacy noteholders to secured status. 

WSFS' predecessor trustee, NEW YORK MELLON TRUST CO., filed suit in FEBRUARY after learning of the situation in DECEMBER and iHEART refused to give the legacy noteholders secured status, but the suit was stayed when iHEART filed for Chapter 11 bankruptcy.  WSFS was appointed successor indenture trustee on MARCH 13th.

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