LIBERTY MEDIA HOPING TO RESCUE iHEART MEDIA
Proposed deal would help radio broadcaster ease crushing debt load
John Malone’s Liberty Media wants to help iHeartMedia Inc. ease its crushing debt load of more than $20 billion.
John Malone’s Liberty Media has swooped in as a potential white knight for iHeartMedia Inc. to help the biggest U.S. radio broadcaster ease its crushing debt load of more than $20 billion.
Douglas County-based Liberty’s proposed deal could link some of the biggest assets in music entertainment, bringing together traditional and satellite radio stations, online services and live events. Plans call for Liberty and Sirius XM Holdings Inc. to sponsor iHeart through a Chapter 11 bankruptcy in exchange for a 40 percent stake, according to a news release. Sirius, which is mostly owned by Liberty, operates the largest satellite radio company. In addition to its land-based radio network, iHeart runs a streaming music service and a division that stages concerts and festivals.
iHeart is strapped for cash in part because of debts run up by Bain Capital and Thomas H. Lee Partners after a 2008 leveraged buyout. Malone’s Liberty empire and Sirius would chip in $1.16 billion in new money, with an assumption that iHeart would would get exit financing with $5.25 billion in gross proceeds, according to the plan. Liberty also would offer a loan to keep iHeart in business during the bankruptcy process, according to the statement.
“It’s certainly positive that you have a strategic investor coming in here and willing to buy the equity, the lowest part of the capital structure,” said Philip Brendel, a credit analyst who follows distressed companies for Bloomberg Intelligence. But it’s also a distraction, albeit a positive one, because IHeart and its key creditors were likely close to finishing details on their existing reorganization plan, Brendel said.
Some of iHeart’s debt, which has traded at deeply distressed prices, rallied as prospects for getting repaid improved.
The San Antonio, Texas-based company already missed a bond payment Feb. 1, putting it on a 30-day countdown to a default. Representatives for Liberty and Bain didn’t respond to messages seeking comment.
Officials at iHeart and Thomas H. Lee declined to comment. IHeart has more than 850 stations nationwide and 24 in Colorado, including KOA NewsRadio (850 AM), 95.7 The Party, 93.3 KTCL and 97.3 KBCO.
IHeart’s efforts to stay out of bankruptcy have stumbled over the insistence of its private equity sponsors on keeping an ownership stake even after the company goes bankrupt. In a typical bankruptcy, stockholders get wiped out. Liberty’s terms didn’t make clear what iHeart’s equity holders would get.
The plan would be consummated no later than Dec. 21, and Liberty would appoint four out of nine of IHeart’s new board members, the term sheet said.
A group of senior lenders recently held talks to finalize a separate proposal, people with knowledge of the conversations said previously. Led by Franklin Resources and advised by PJT Partners and Jones Day, the group planned to pitch the plan this week to some of iHeart’s more junior creditors and form a unified front.
Liberty’s proposal isn’t meant to push aside those plans, according to the document. It’s “intended to work in concert” with those discussions “and in effect be added to that plan,” according to the statement. “Liberty is familiar with, and does not have significant issues with, latest creditor proposals to the company that have been publicly disclosed.”