Despite widespread speculation that a Chapter 11 restructuring was likely to occur last weekend, iHeartMedia will not be taking such action until at least March 13.
The nation’s No. 1 radio broadcasting company landed another three business days — plus the weekend — to deal with a $106 million interest payment it failed to make on February 1.
In a largely anticipated SEC filing made early Thursday (3/8), iHeart revealed that it has extended the term of a short-term forbearance agreement with respect to its May 2008 credit agreement with its consenting lenders until Tuesday at 12:59am Eastern. This reflects a Midnight deadline for the company based in San Antonio, Texas.
The grant from the Consenting Lenders, for a second time, temporarily holds back an acceleration of the obligations under the agreement — in this case, an event of default for iHeart’s failure to make the hefty interest payment on its 14% senior unsecured notes due 2021.
The company officially had a 30-day grace period to make the interest payment before an event of default is triggered.
As previously reported, iHeart is actively working with its stakeholders on a restructuring of its capital structure and has been working on a proposed draft restructuring support agreement and related proposed draft restructuring term sheet with its advisors to groups of iHeart noteholders, lenders and equity holders.
The Forbearance Agreement follows a Friday (3/2) filing reflecting its “attempt to harmonize the views that it has received directly from the various groups of noteholders, lenders and the company’s equity holders.” This is a new term sheet that decreases the equity consideration by 1.5% from the Feb. 8 proposal offered by iHeart lenders.
Regarding the 2021 Notes and Legacy Notes, the lenders seek $200 million in new debt for the recapitalized iHeart, pari passu with new debt issued to the term loan and PGN lenders; 5.25% equity in a recapitalized iHeart, and 3.3% warrants struck at $6.5 billion equity value.
Here, equity in a recapitalized iHeart is also a sticking point, with iHeart offering 0.25% less.
Once the equity in a recapitalized iHeart is agreed upon, it appears iHeart will immediately submit to a U.S. bankruptcy court and the SEC a Restructuring Support Agreement and Term Sheet that as of now remains incomplete. This yet-to-be finalized Term Sheet was included in the March 5 SEC filing announcing the Forbearance Agreement.