iHeartMedia, the largest network of terrestrial radio stations in the United States, is set to file for bankruptcy soon. Currently, the company is about $20 billion in debt. According to insiders, advisors for the company’s senior creditors have seen the documents that will be used on the first day of the company’s bankruptcy proceeding.
Although it can seem sudden, iHeartMedia has actually been in talks with its creditors for months about how to handle its massive debt. The bankruptcy is coming after the media company has been repeatedly unable to work out a manageable way to handle its debt with its largest creditor group and determine how to divide the equity in its radio business with junior debt holders.
Missed Payments Lead to Bankruptcy
The bankruptcy filing comes after the media giant missed its February 1st, 2018 interest payment to creditors and failed to make the payment during the following 30-day grace period. It also missed payments on two sets of bonds.
Although the company’s leaders have been in talks with its senior lenders for over a year, there are still no formal support agreements in place. One of the hurdles that have been blocking the company’s bankruptcy plan from being finalized is its private equity sponsers’ insistence that they retain a stake in the company following its Chapter 11 reorganization.
With Chapter 11 bankruptcy, companies restructure to make themselves profitable once again. One potential future for iHeartMedia is SiriusXM Radio, the largest satellite radio network in existence. For comparison, iHeartMedia operates about 850 radio stations, seven of which are broadcast from Chicago. Taking this route would mean accepting Liberty Media’s offer to buy a stake in iHeartMedia. Liberty Media has already purchased a portion of iHeartMedia’s debt and claims this new offer would help it financially through bankruptcy, but analysts said its offer was not high enough to cover iHeartMedia’s current financial needs.
The company and its creditors are currently working out what will happen in its future. Thus far, the company disclosed a plan for its Chief Executive Officer Bob Pittman to receive a bonus. Junior bondholders who control more than $200 million of the company’s unsecured debt could sue it in a New York court over their allegation that iHeartMedia secretly used its assets to secure additional debt over a multi-year period.
Work with an Experienced Fox River Grove Bankruptcy Lawyer
If you are considering filing for bankruptcy to reorganize your business, contact our team of experienced bankruptcy lawyers at Newland & Newland, LLP today to set up your initial legal consultation with a member of our firm. Every bankruptcy case is unique. During your consultation, we can examine your case to determine if bankruptcy is the right course of action for you and if so, how to proceed with it effectively to take control of your debt. We serve clients in the Arlington Heights, Palatine, Rolling Meadows, Libertyville, Mundelein, Buffalo Grove, Schaumburg, Elk Grove, and Itasca areas.
(image courtesy of Milivoj Kuhar)