Forbearance Deal Keeps iHeart Away From Interest Payment Default


While media industry observers eagerly anticipated the weekend filing with the U.S. Securities and Exchange Commission of a Chapter 11 restructuring proposal from iHeartMedia, none had been made public as of 8am Monday (3/5).

However, there is new news regarding the nation’s biggest owner and operator of radio stations. It’s bought itself 72 hours to deal with a $106 million interest payment it failed to make on February 1.

In an 8-K filing made early Monday with the SEC, iHeartMedia noted that its “iHeartCommunications” indirect subsidiary and its Consenting Lenders have entered into a short-term forbearance agreement with respect to its May 2008 credit agreement.

The grant from the Consenting Lenders temporarily holds back an acceleration of the obligations under the agreement — in this case, an event of default for iHeart’s failure to make a $106 million 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.

With the forbearance agreement, iHeart now has until 12:59am Eastern on Thursday, March 8; this reflect a Midnight deadline for the company based in San Antonio, Texas.

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 March 5 SEC filing 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 Monday’s SEC filing announcing the Forbearance Agreement.



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