Complex Bondholder Efforts Could Officially Split iHeart and CC Outdoor


In a highly complex series of private offers to its bondholders, iHeartCommunications — the over-arching entity for publicly traded iHeartMedia and CC Outdoor Holdings — on Wednesday hit the start button on a plan that calls for a note swap … and a possible separation of iHeartMedia and CC Outdoor into two fully distinct and independently owned-and-operated companies.

Specifically, holders of its “Five Series of Priority Guarantee Notes” and its Senior Notes Due 2021 are being called on to turn in those notes, and to exchange them for new securities in connection with “a proposed global restructuring of its indebtedness.”

At the same time, iHeart is also seeking bondholder approval to amendments that would see a newly formed entity — CCO Holdings — hold an approximate 89.9% equity interest in Clear Channel Outdoor Holdings. But, this would only happen “upon closing of the Offers if the High Participation Threshold is achieved.”

Furthermore, iHeartCommunications on Wednesday commenced private offers (the “Term Loan Offers”) to eligible lenders under iHeartCommunications’ Term Loan D and Term Loan E facilities (the “Existing Term Loans”) to amend the Existing Term Loans and to exchange the Existing Term Loans for new securities of the issuers and Broader Media LLC.

The exchange offers and the consent solicitations for each issue of existing notes will expire at 5pm Eastern on April 14, unless extended by the issuers.

In an important caveat, the type and amount of securities that are issued at the closing of the exchange offers will depend on participation level in these offers, and the Term Loan offers.

The new securities consist of new debt of iHeartCommunications and, in the High Participation Scenario, Class B common stock of CCO Holdings and warrants to purchase Class D common stock of iHeartMedia. The Class B Common Stock will represent an economic interest of up to 49% of the total economic interest in CCO Holdings and up to a 19% voting interest in CCO Holdings.

The warrants will have no voting interests but will represent economic interests of up to 49% of the total economic interest in iHeartMedia.

The key takeaways: No Class B common stock or warrants will be issued in a Mid Participation Scenario or the Low Participation Scenario, and the High Participation Scenario will result in the separation of the media and outdoor businesses.

In the Mid Participation Scenario and the Low Participation Scenario, the media and outdoor businesses will remain consolidated subsidiaries of iHeartCommunications.

Each series of new notes will accrue interest beginning on the issuance date at a rate per annum equal to the rate set forth in the title of such series of notes.

Interest on the new 8.5% Senior Secured Notes due 2021 of iHeartCommunications (in the High Participation Scenario) or the new 9.0% Senior Notes due 2021 of iHeartCommunications (in the Mid Participation Scenario or the Low Participation Scenario) will be payable in a combination of cash and payment-in-kind notes.

Interest on each other series of new notes will be payable entirely in cash.

The new notes will be fully and unconditionally guaranteed, jointly and severally, on a senior basis by iHeartCommunications’ parent, iHeartMedia Capital I LLC, and all of iHeartCommunications’ existing domestic wholly-owned restricted subsidiaries.

Additionally, the new notes will be secured by a first-priority lien on substantially all of the assets of iHeartCommunications and the guarantors (other than collateral securing the liens under iHeartCommunications’ receivables based credit facility).

The new notes will also be secured on a second-priority basis by iHeartCommunications’ and the guarantors’ assets that secure the receivables based credit facility on a first-priority basis, including certain accounts receivable and related assets.

Investors seem pleased with the plan, as IHRT shares soared 17.4%, to $1.35, just before the Closing Bell on Wall Street on Wednesday.


After the Closing Bell on Wednesday, Moody’s weighed in on iHeart’s proposed exchange offer by noting that the effort aimed at helping to restructure its debt would be considered “a continuation of its distressed exchange.”

Moody’s categorized iHeart’s debt exchange of $476 million of senior unsecured notes due 2018 for a like amount of Senior Secured PGN due 2021 a distressed exchange in February.

The exchange offer would potentially reduce the amount of outstanding debt and lower overall interest rates, which would improve its free cash flow position, Moody’s says.

Moody’s acknowledges that it’s unclear if the current exchange offer will be accepted by lenders and, if accepted, what the level of participation (high, medium, or low) will ultimately be. Thus, it is unclear how substantial the improvement in iHeart’s balance sheet will be after the offer is executed.

However, Moody’s believes the separation of the media and outdoor business proposed in the high participation scenario would likely be a credit positive for Clear Channel Outdoor Holdings Inc. and its rated entity, Clear Channel Worldwide Holdings, as it would improve available free cash flow and reduce the prospects of asset sales or any other transactions to help service debt at iHeart.