iHeartMedia Bankruptcy Postponed As Lender Negotiations Continue

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iHeartMedia’s lenders reached an agreement Sunday not to declare the company in default, according to an update filed with the Securities and Exchange Commission on Monday morning. The move apparently gives lenders more time to reach a deal that would place iHeartMedia in bankruptcy, restructure its debt and transfer equity ownership to lenders. 

The sequence of events started when February 1st when iHeart skipped an interest payment on its 14.00% Senior Notes due 2021. The loan terms called for iHeart to default on the loan if the interest does unpaid for 30 days. iHeart has about $20 billion of debt including $8.3 billion that mature in 2019.

The ongoing negotiation now involves Liberty Media, media mogul John Malone’s holding company that owns significant stakes in promoter Live Nation and satellite radio company SiriusXM. Liberty bought $400 million off iHeart debt from GSO Capital Partners and issued a term sheet on February 26th. Liberty’s offer would give iHeart $1.16 billion in exchange for 40 percent of iHeartMedia’s common shares (to be split evenly between Liberty Media and SiriusXM). According to iHeart’s term sheet filed with the SEC on March 2nd, lenders rejected Liberty Media’s plan.

iHeart’s term sheet calls for a prepackaged bankruptcy in which lenders give a $200 million loan in exchange for nearly all equity in iHeart and total ownership of Clear Channel Outdoor Holdings, a sister corporation that sells outdoor advertising such as billboards. Lenders of the 2021 notes would receive 5 percent of the equity in the recapitalize iHeart. Existing iHeart equity owners would receive  1.75 percent of equity under iHeart’s plan.