Fight at iHeart Reaches Pivotal Point iHeart's Fight Reaches Pivotal Point -- WSJ
July 21 2017 - 3:02AM
Dow Jones News
By Soma Biswas
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (July 21, 2017).
A nearly two-year long battle between iHeartMedia Inc. and a
bondholder group led by Franklin Resources Inc. is coming to a head
in the wake of the company's proposal of a sweetened offer.
A resolution to the standoff could allow iHeart to avoid
bankruptcy.
In its battle to win over bondholders who hold the key to its
fate, iHeart Communications has signed up a group of funds led by
Eaton Vance Investment Management, Symphony Asset Management and
OppenheimerFunds to convince holders -- especially Franklin -- that
it is better to take the new deal than push the company into
bankruptcy, according to people familiar with the matter.
IHeartMedia Inc., formerly known as Clear Channel, is headed by
Bob Pittman of MTV fame and the biggest operator of radio stations
in the U.S. In addition to more than 800 radio stations, the
company also owns billboard advertising company Clear Channel
Outdoor Holdings.
It is one of the last of several companies taken over in the
private-equity megadeals of a decade ago that is still grappling
with debt it took on in its 2006 leveraged buyout by Thomas H. Lee
Partners and Bain Capital. The target companies in other big
buyouts from that era that subsequently soured filed for bankruptcy
long ago. These include Caesars Entertainment Corp. and Energy
Future Holdings Corp., both of which are still making their way
through chapter 11.
For months, iHeart had circulated an offer that hands over as
much as 49% of the equity in both iHeart and its valuable Clear
Channel Outdoor Holdings billboard unit to bondholders if a
substantial group of them agree to extend maturities and take
haircuts, or markdowns, on their debt. In that proposal, private
equity owners Thomas H. Lee and Bain would hold on to a 51% stake.
The proposal garnered little interest, and the holdout group, of
which Franklin has the biggest slice of iHeart debt, has argued
that they are entitled to more equity in both companies, according
to the people familiar with the matter.
Earlier this week, the company disclosed details of talks with
another group of bondholders led by Eaton Vance, Symphony and
OppenheimerFunds over the new deal. In its revised proposal, iHeart
is offering bondholders a number of sweeteners, chief among them an
additional $500 million in debt backed by 51% of the shares in
iHeart and in Clear Channel, according to public filings. The new
slug of debt will effectively delay Thomas H. Lee's and Bain's
ability to monetize their shares in the company until the debt is
paid off, according to a person familiar with the matter.
It is yet to be seen if iHeart can entice enough bondholders to
go along with the deal to pull it off. Even with the support of the
private-equity owners, the Eaton Vance group would have to win over
holders of a substantial amount of debt to prevail.
The holdout group owns more than $6 billion in iHeart's $15.8
billion in debt, while the Eaton Vance group holds about $1
billion, according to public filings. In addition, Thomas H. Lee
and Bain have amassed $1.6 billion in the company's debt, according
to public filings.
The new proposal, like the former one, pushes out by two years
the maturity of a big chunk of iHeart's debt, and bondholders must
take a haircut on their debt.
Write to Soma Biswas at soma.biswas@wsj.com
(END) Dow Jones Newswires
July 21, 2017 02:47 ET (06:47 GMT)
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