Editor’s Note: This story was updated at 10:30am Eastern to correct an original report distributed at 6:20am Eastern stating that U.S. Bankruptcy Court Judge Marvin Isgur approved a Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of iHeartMedia. RBR+TVBR and Streamline Publishing’s Radio Ink, along with AllAccess, each distributed bulletins reflecting this incorrect information: iHeart has submitted the plan, and it awaits Isgur’s signature. Language in the document is written to reflect Isgur’s pending decision, and is common in such legal filings. RBR+TVBR regrets the error.
HOLLYWOOD — After five amendments, and some modifications, a Chapter 11 plan of reorganization initially proposed with its April 28, 2018 submission to the U.S. Bankruptcy Court for the Southern District of Texas is now in the hands of Houston-based judge Marvin Isgur.
It is iHeart’s home that, with its submission late Monday, that Isgur rules in favor of a plan that saw many rewrites and challenges over the last seven months.
In fact, iHeart has put words in Isgur’s mouth, as the document it filed that it wants Isgur to sign states, as if Isgur said it, “”The plan satisfies the ‘best interest of creditors’ test of the bankruptcy code.”
The plan awaiting Isgur’s blessing as of Tuesday morning is a Modified Fifth Amended Joint Chapter 11 Plan of Reorganization of iHeartMedia and its debtor affiliates, pursuant to the regulations stipulated in U.S. bankruptcy code.
As such, iHeart is ready to hit the express lane as it continues its twisting, pothole-filled cannonball run toward lowering its towering $20 billion debt to $5.75 billion — a figure much more favorable than the $10 billion initially believed to be sought by iHeart.
The lower figure was first revealed during Radio’s Financial Summit, Forecast 2019, in New York by Pittman in an appearance at the event.
New iHeart Class A common stock will be issued, along with new Class B shares.
The hoped-for approval of Isgur of the modified fifth reorganization plan couldn’t come at a better time for iHeart, which today (1/8) unveiled new integrations for its iHeartRadio app at CES 2019 in Las Vegas. The Consumer Electronics Show is one of the world’s largest tech expos and conferences, and news of an emergence from bankruptcy could very much buoy iHeart’s presence there.
Further, iHeart is coming off a strong November, with net income in the month of $104.2 million — its highest month since monthly operating reports were submitted to Isgur’s court in April 2018. Revenue was $343.7 million, slightly lower than that seen in October 2018. However, month-to-month comparisons should not be used as a gauge of performance in the radio industry, with year-to-year figures the true sign of financial health.
As iHeart’s lead attorney, Patricia Tomasco of Houston-based Jackson & Walker will likely attest, her client is healthier than it has been in more than a decade.
In a 97-page document filed late Monday (1/7), iHeart’s legal team under the direction of Tomasco wrote the following declaration, which it wants Isgur to approve:
The Plan and the other Plan Documents shall be, and hereby are, confirmed under
section 1129 of the Bankruptcy Code. The terms of the Plan Documents are incorporated by reference into, and are an integral part of, the Plan and this Confirmation Order and are
authorized and approved, and the Debtors and Reorganized Debtors are authorized to implement their provisions and consummate the Plan without any further authorization except as expressly required by the Plan or this Confirmation Order.
The order would require iHeart to immediately fulfill at least one outstanding bill.
SoundExchange is owed some $593,683.80. This must be paid within 30 days of the effective date of the plan, or a date and time mutually agreed upon by SoundExchange and iHeart.
Further, iHeart would need to resolve any and all obligations it has with SAG-AFTRA, including any arbitral awards entered in any grievance filed.
Then there is the National Football League’s Denver Broncos. Per the proposed order, iHeart will waive all of its rights to nix any contractual agreements with the Broncos and will assume all of its contractual deals with the team — a move designed to remedy any outstanding payments owed to the franchise.
Lastly, any outstanding payments to Broadcast Music, Inc. (BMI) and SONY Music Entertainment must be made by iHeart. BMI had filed a limited objection earlier on Monday.
How does the Term Loan/PGN Group feel about this? They are signaling a thumb’s up, with a statement filed Monday in support of the plan confirmation right before the issuance of iHeart’s filing of the proposed order it wants Isgur to OK.
Members of the Term Loan/PGN Group hold or represent more than $7.4 billion in senior Term Loan Credit Agreement Claims and PGN Claims. They are the largest creditor
group. Under the plan, holders of Term Loans and PGNs have agreed to allow
nearly $500 million in distributions to creditors holding the Legacy Notes, the
14% Senior Notes due 2021, and the CCOH intercompany note, and “enhanced
distributions of 14.44% of their allowed claims.”
Unsecured creditors of the Guarantor Debtors will receive recoveries between 45% and 55% – “well over six times the highest natural recovery of any unsecured creditor of a Guarantor Debtor and approximately $17.5 million in total.”
Moreover, “to resolve the Committee’s alleged claim for avoidance of the guarantees issued by the TTWN Debtors, holders of Term Loans and PGNs have agreed that unsecured creditors of those entities will be paid in full, exponentially higher than their putative natural recoveries and nearly $2 million in total,” the seven-page filing states.
Lastly, Term Loan and PGN holders agreed to provide more than $1 million in value to creditors of the Non-Obligor Debtors and approximately $30 million in value to the existing equity owners of the Debtors.
“These massive concessions by holders of Term Loans and PGNs – totaling over half a
billion dollars – enabled the Debtors to propose a broadly consensual Plan,” they said of iHeart. “Not only has every impaired class voted to accept the Plan, only three timely confirmation objections remain outstanding.”
Two relate solely to the scope of the Plan’s proposed releases — the U.S. Trustee and
Only WSFS, indenture trustee for the Legacy Notes, objected to confirmation in toto.
Delaware-based WSFS Bank, the indenture trustee for 6.875% senior notes due 2018 and 7.25% senior notes due 2027, represents $475 million of outstanding Legacy Notes – “less than three percent of the Debtors’ outstanding funded debt,” the Term Loan and PGN holders state.
WSFS has been the remaining thorn in the side of iHeart. As the Term Loan and PGN holders note, two PGN indenture trustees — WSFS and Computershare Trust Company — “belatedly objected” on Friday, Jan. 4.
This, they note, is more than five weeks after the deadline established by the Court for
the filing of objections to confirmation. Their complaint? The Court should not confirm the Plan because it fails to preserve their alleged indemnification rights against iHeart.
“The trustees and collateral agent claim that they are exposed to post-effective date liability because a minuscule number of PGN holders opted out of the Plan’s global release,” the Term Loan/PGN holders note. “This is a dubious objection. None of the objectors have identified a single claim that has been threatened, much less asserted against them.”
Further, they note, Computershare has only been a PGN trustee for less than four months.
The Term Loan/PGN Group is represented by Thomas Howley at Jones Day.
Meanwhile, a “joinder of certain funds” or affiliates of Bain Capital and Thomas H. Lee Partners in support of the plan’s confirmation was submitted to the court. They also chided WSFS. ” WSFS has failed to identify any conduct that meets the exacting standards required for the extreme remedy of equitable subordination and, in any event, confirmation of the Plan will moot WSFS’ adversary proceeding by resolving specific claims properly belonging to the Debtors and their estates.”
What’s left for iHeart? A hearing set for Thursday at 9am Central will be held to consider all confirmation issues other than those scheduled to be heard on two subsequent days. On Jan. 17 at 9am, Isgur will hold a hearing to consider all issues concerning the Clear Channel Outdoor Holdings separation settlement, while a Jan. 22 hearing at 8:30am will be held to consider all remaining issues concerning consideration of the class action settlement related to the CCOH Separation Settlement and a motion from Mario Gabelli-led GAMCO.
At 2:30pm on Jan. 23, all remaining confirmation issues will be heard by the court.
Then, iHeart will be ready to celebrate its rebirth, as a new era for the nation’s largest owner of radio stations will fully usher in the new year.
All it takes is Isgur to sign the document initially believed to be sealed, and delivered.
A source tells RBR+TVBR that will likely come no sooner than Jan. 17, with announcements certainly heralding the transition from debtor-in-possession status for the nation’s top radio company.