Liberty Media Offers iHeart A Rescue Plan


It’s earnings season, yet iHeartMedia has been mum with respect to the release of its Q4 and year-end 2017 earnings report. A release date, and subsequent conference call for investors and Wall Street observers, may be contingent on what the company does to reach a deal with its lenders on a restructuring plan.

Based on information released Monday (2/26), Liberty Media Corp. appears ready and willing to work with iHeart’s creditors on a restructuring term sheet that would involve a big stake in the company.

The news came from “certain iHeartCommunications lenders and noteholders,” who note that a term sheet for restructuring of iHeartMedia was received Saturday; it was drafted on Friday.

As previously reported by RBR+TVBR, iHeart has been working to resolve its Term Loan D and Term Loan E debt. With talk of a Chapter 11 reorganization coming as soon as Wednesday, a SEC filing made February 9 by the company indicates that the lone remaining bargaining point appears to be the percentage of equity in iHeart that the company is willing to cede.

The lenders on Feb. 8 presented a new proposal that calls for the following:

  • A pre-packaged and pre-arranged bankruptcy
  • $5.55 billion in new debt at a recapitalized iHeartMedia, with a 5-7 year maturity
  • Equity consideration of 94.75% equity in a recapitalized iHeart
  • Equity consideration of 100% of iHeart’s ownership stake in Clear Channel Outdoor

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.

How did iHeart respond?

First, it has no objection to a pre-packaged or pre-arranged bankruptcy. Second, it’s fine with the debt consideration. Third, there’s no problem with giving up iHeart’s 100% ownership in Clear Channel. The snag is over the percentage of equity in a recapitalized iHeart it is willing to give up.

For iHeart, the percentage offered to its lenders is 89.5%.

Now comes a freshly drafted term sheet from Liberty, the parent of Sirius XM Satellite Radio. The term sheet reflects ABL facility claims of approximately $365 million in unpaid principal plus interest, fees, and other expenses.

There are also “Senior Communications Claims” for the following:

  • Term Loan D due 2019 – $5.0 billion
  • Term Loan E due 2019 – $1.3 billion
  • 9.0% Priority Guarantee Notes due 2019 – $2.0 billion
  • 9.0% Priority Guarantee Notes due 2021 – $1.75 billion
  • 11.25% Priority Guarantee Notes due 2021 – $871 million
  • 9.0% Priority Guarantee Notes due 2022 – $1.0 billion
  • 10.625% Priority Guarantee Notes due 2023 – $950 million

Additionally, “Unsecured Notes Claims” are as follows:

  • 14.0% Senior Notes due 2021 – $1.764 billion
  • 6.875% Senior Notes due 2018 – $175 million
  • 7.25% Senior Notes due 2027 – $300 million

There’s more: General Unsecured Claims of $6 million and Unsecured Security Claims of $26 million are discussed.

Pertinent to the Liberty Media offer is a section pertaining to new cash investment and Liberty plan distributions.

There would be $1.159 billion in new cash invested under the plan offered by Liberty; Liberty and Sirius would receive 40% of “new common shares” in a recapitalized iHeart, split equally between the two entities.

The cash investment could be offset by the Senior Communications Claims held by Liberty, however.

What about Clear Channel Outdoor? The Liberty plan would see CC Outdoor spun off in a taxable transaction.

With regard to exit financing, the Liberty plan assumes new secured exit financing, with gross proceeds of $5.25 billion.

The plan would need to be consummated no later than Dec. 21, 2018.

What else would Liberty seek in obtaining a minority stake in iHeart? A nine-member board of directors would see Liberty appoint four, with one independent member for audit committee purposes. The CEO will be a director, while iHeart would have the right to designate four directors, two of whom will be independent for audit committee purposes.

It is important to note that this is an offer; there is no guarantee that iHeart will accept it.