iHeart Imploding?

[voguy]

We'll have to see how Coast to Coast changes as parent company is being rocked with debt, and now the banks are calling in the loans.

STORY

As written in the trades....

iHeart can’t kick the can down the road any more – It owes too much.

Some bondholders claim the company recently violated some covenants and triggered an “event of default.” That was Monday, and iHeart dashed to State District Court in San Antonio and sued the bondholders. It’s asking for a declaratory judgment that it’s not in default, and requesting temporary and permanent injunctions “to fully protect our rights.” Will that work, though? By selling off some assets (broadcast towers, some outdoor assets) and exchanging some debt for new high-interest notes, the company thought it had bought enough time to get to 2018, when there’s a real crunch - like over $1 billion due in 2018 and another $8.3 billion in 2019. This year only about $193 million worth of notes mature. But the company’s recent trick of contributing 100 million shares of Class B stock of its Clear Channel Outdoor Holdings subsidiary to a new subsidiary named “Broader Media” (February 4 NOW) ticked off some bondholders. Collectively, they own more than 25% of iHeart’s priority guarantee notes, and they’re the ones who filed Notices of Default.
A cascade of defaults?

If iHeart bondholders get their notices of default to stick, they’d be able to call all their debt – demand payment – in 60 days. That would precipitate a cascade of other defaults, to the point that iHeart might not be able to stop the tumble-down effect. The company tells the SEC here that there’s “no basis” for the holders to squawk about giving $516 million in Clear Channel Outdoor Holdings stock to its Broader Media “unrestricted subsidiary.” In a public statement, it explains that “The strong performance of our operating business provides us with the flexibility to manage our capital structure in a prudent manner.” (The problem, of course, is the stubborn $20.9 billion in debt left over from an ill-timed buyout of Clear Channel in mid-2008, just as the banking system froze up.) iHeart’s SEC statement ends ominously – “If we are unable to obtain the requested relief from the court” – getting the declaratory judgment and injunctions – “or are otherwise unable to successfully contest the validity of the notices...” Well, here’s how that sentence ends – “Then we would need to pursue other available alternatives to address the claimed defaults.” Those “alternatives” would lead iHeart further down the path to more legal and financial maneuvers, including a possible re-structuring. One problem could occur away from Wall Street – iHeart employees who get distracted by the daily twists and turns of the battle. Reuters says iHeart just retained Moelis & Company to advise on strategy and options. And to “tackle the debt burden.”

And then today.....

iHeart buys 14 days with a court order against bondholders.

It found a friendly reception in its hometown of San Antonio, where a judge gave it the temporary restraining order that rescinds the so-called notices of default filed by a group of lenders. It’s good for 14 days, and iHeart says “for good cause shown, the court may extend the TRO up to 14 additional days.” (Read iHeart’s latest SEC filing here.) But there’s a catch – iHeart agrees “not to sell, transfer, encumber, pledge, hypothecate or otherwise dispose of any interest in, or proceeds of,” the 100 million shares Class B common stock in its subsidiary, Clear Channel Outdoor Holdings. This is a temporary freeze, while high-wire negotiations take place between a group the New York Post identifies as including Canyon Capital Advisors. It and Goldman Sachs have been organizing a collection of bondholders to press iHeart to pay down debt, instead of paying junior bondholders. Yes, this gets complicated and abstruse, but it’s ultimately a game of chicken – iHeart’s got a limited amount of levers it can pull, to produce money to pay various creditors. Who will get the money from those levers?


Then this afternoon......

A $6 billion problem for iHeart.

The bondholder group that includes Canyon Capital Advisors, D.E. Shaw, Davidson Kempner and Franklin Advisors is ultimately owed more than $6 billion. (They might also hold other classes of debt.) On Monday they notified iHeart that they consider it in default, for moving $516 million in Clear Channel Outdoor Holdings stock (those 100 million shares) over to its “Broader Media” subsidiary. Yesterday’s story here about a potential “cascade of debt” means that within 60 days, these creditors would want all their $6 billion paid. That’s impossible, of course. One creditor tells the NY Post “They are forcing iHeart to get a complete debt-exchange done.” What might happen is a deal to pay these senior bondholders the $196 million dividend iHeart got from CC Outdoor in January. Plus the proceeds of a recent asset sale – and that might buy the company more time with these particular lenders. But the junior lenders won’t like it. The Post says “iHeart might also need to give up about 25% of the business to junior creditors, in exchange for forgiving $2 billion in debt.” Bloomberg also has more on the sudden crisis, here. Bain Capital and Thomas H. Lee Partners knew this day would come, but they hoped it wouldn’t be in 2016, much less early 2016. They’ve been saying they could handle the relatively small amounts of debt maturing this year and in 2017, and they had a plan beyond that. The bondholders – several groups of them – have different plans. What might happen? A re-structuring that might include trading debt for equity in the company for not just the junior bondholders, but other claimants. iHeart’s still got that $20.9 billion debt load from the terribly-timed 2008 buyout from the Mays family. iHeart employees sit – and watch in fear.


From the Rumor Mill – iHeart wants margins of 50% or more.

Many big radio markets already perform at the level of 50% or better. (By the standards of most American businesses, that’s a huge cash-flow margin.) It’s the smaller markets where the Regional Presidents are being told to get the numbers up, as a regional average. This NOW Newsletter hears that there will be structural changes, to drive down costs. There may be markets where the GM will also become the sales manager. (If he or she isn’t already.) And where the current director of sales or other sales management may be asked to step back to a Senior AE role. This supposed “redefinition of positions” isn’t just in sales, but it’s probably coming to programming, too. One source calls it “a thinning of the ranks in management.” The 36 Region Presidents, who report up to the four Division Presidents, supposedly have some flexibility about how they hit the 50% cash-flow margin. But in some buildings, there aren’t many choices left, given past layoffs and RIFs (reductions in force). For example, it’s not clear what just happened in West Palm Beach, where iHeart announced “two new Senior Vice Presidents.”


Personal note. If iFart Radio and Cumulus Media (whose stock is now only .37 a share) start selling stations, I would be interested in media ownership.

[fos]

Reading about all of that debt makes my head hurt. Kind of like the trillions (with a T) debt the US as a whole is in.....

I have always wondered how iHeart Radio could give away streaming live radio (with advertising that I never watch) and Apple charges $10 per month for a similar new service?

Oh well, my streaming isn't very reliable at my office during the day anyway. And living in a remote area, my over the air options are limited. The majority of over the air programming is sports. Listening to sports is like listening to a recorded book, it puts me to sleep.

fos

[voguy]

Reading about all of that debt makes my head hurt. Kind of like the trillions (with a T) debt the US as a whole is in.....
I have always wondered how iHeart Radio could give away streaming live radio (with advertising that I never watch) and Apple charges $10 per month for a similar new service?

The business model was similar to that of the housing bust where you had people paying 2x or 3x what houses were worth tho get them, then using those houses at those values as collateral to buy more houses. It was an investment banker scheme from the start.

As for iHeart app; that was designed to be built up and then sold for a ridiculous price to a .COM company.

And now Cumulus Media in trouble, so there may be two going down the toilet together, (which suits me fine). Overall, 73.4% of the employees who were in radio have left the business because of these two companies, and along with them the listeners also left because of substandard programming,

[Doka]

A question Voguy? Cumulus and Iheart how many of the main stream" Talk Shows" shows are on them? Could this be a way to eliminate conservative talk?

[voguy]

A question Voguy? Cumulus and Iheart how many of the main stream" Talk Shows" shows are on them? Could this be a way to eliminate conservative talk?

iHeart owns Premier radio and they have (to my knowledge) partnerships with Beasley Broadcast Group, Tribune Media, Radio Disney, and Salem Communications, for program distribution. In theory, if they were to go down it could play hard on the networks.

Basically, Doka, the way it works is if you're a radio station, you either pay for the show, or allow the network's ads to run and the network then makes their money from the advertisers extra money. It's more profitable for a network for the station to pay them than to rely on the ads from the network playing.

What I suspect would happen would be all the radio stations who get the shows for free would get cancelled first, and then the network would have to rely on transmission fees from the rest.

What Premiere and CC/iHeart have counted on is the monopoly of stations, and thus their conservative owners have sort of a "captured" audience. The Mays family made that clear in 1986.

So if they do collapse in debt, that means they will have to find a way to get paid or the stations not paying will have to find new programming.

I don't know how old you are, but 20 to 40 years ago we never had a problem with finding programming. It may have been more conservative or more liberal than we had today, but there was no end to the variety of shows. And as the free market proves, those who can stand on their content and interest survive, and those which are crappy go away.

My personal feeling is if radio ever gets back to the local owner and operator, you'll see more, and wider varieties of talk shows. And you'll have more programs like Bell had in his early years which will be unique to regions.

One thing is certain, the Walmartization of radio killed content and choices.

[Doka]

I'm really TOO close to 70, I was raised on "Inner-Sanctum", The Shadow, Amos an Andy, The Lone Ranger , Arther Godfry(yuk) and a whole bunch of wonderful programs of the imagination. I don't recall "just" talk shows, they all had singing , guests, and skits. I don't remember anything political . When T V came in , I was 9 , when we go our's ,I'm sure it changed radio dramatically over the years. I didn't start listening again, other than music , until I found Art starting his show, 1992/ 1993 ?

Side note....When we got our TV, tubes where always blowing, little tubes, big tubes, hopefully not the picture tube, it was very spendy, any way we went back to the radio, sat on top of the TV and looked at the radio, like a bunch of idiots.

[voguy]

I'm not that far behind you in age.

Early technology was fiercely maintenance heavy, as well as costly. If you look at the income/expenses of those in the 50s/60s and what they spent to maintain technology it was a far bigger ratio than today. However what they had then which we don't have now is what is called localism. Localism is where a local owner and staff are invested into a community and are basically the keystone for the community. When something happens in the region it is where people go for information, knowing their radio station will be on top of it. Contrast that to today where the iHeart and Cumulus stations will do everything they can to shield themselves from work or effort. Reason being, there is nobody working at the stations. Cost containment has driven the human out of the stations leaving only a computer to run things. Sidenote: A good read on the dangers to this starts in 2002 when Clear Channel's station in Minot, North Dakota, was employee-less during a citywide emergency. This sort of thing has happened again and again in various communities where something happens and people tune to their radio station only to hear music or a talk show. These companies put more effort into damage control, denying a problem, or spinning the story than doing the right thing and staffing stations.

Several years ago I was working for an Ohio television station when we had a weather phenomenon called a durecheo. Unprecedented winds of 70+ mph caused widespread damage, and even death. The local corporate stations kept playing their 12 in a row all the way through the storm or until they were knocked off the air. Our TV station, however, was on the air 3 hours before the storm warning people to "prepare". Of course the big problem here is that radio tends to be mobile, so people out driving never got the word, and with 110 channels on the cable if you were not watching us at the time you never knew what was going to happen.

Sadly, Congress, (who controls the FCC), has so many of their members having their pockets padded that the consolidation which occurred in 1986 will likely not be broken up soon. My own Congressman at the time took $125,000 from CC for his vote to allow media concentration. At some point we have to get radio back into the hands of local people who are invested in the business or operating in the interest of the public and no being accountable to a large corporation for "towing the line". The reason you see mostly conservative shows is because both large broadcast corporations heavily favor conservative candidates and positions, and they have worked hard to silence the other side.

I just wish people would wake the f- up and just start making it hard on Congress to hold hostage the radio business. And I pray that those involved in the corporations pass away in their sleep, soon.

[voguy]

iHeart’s dilemma

Here it is in a nutshell. The San Antonio Express-News lays out the debt situation faced by Bain Capital and Thomas H. Lee Partners – Before they closed on buying out the Mays family and taking Clear Channel private in mid-2008, “the company had $18.8 billion in assets and $5.2 billion in long-term debt. At the end of last year iHeart Media had just $13.8 billion in assets, and $20.7 billion in debt.” In nearly eight years, Bain/THLee Partners have never pruned the debt below $20 billion. The stations are throwing off lots of cash flow (as is 90%-owned Clear Channel Outdoor). It’s just that they’re shackled by enormous debt. And (you could argue) that’s bad for the entire radio industry.

Another story...

iHeart says a rival is already using “the uncertainty” of default notices against it.

Radio sellers know all about sharing bad news about a competitor, and it happens in the billboard business, too. In San Antonio, David Hendricks at the Express-News says one of iHeart’s arguments to a Texas county court is that billboard giant J.C. Decaux “has already used the uncertainty at iHeart to argue that it is a more reliable company” than iHeart-controlled Clear Channel Outdoor. iHeart was successful in winning a 14-day temporary restraining a week ago against a group of aggressive bondholders. That TRO holds the possibility of a second 14-day period – and then things could get really testy. One of the other risks iHeart gives to the court is that it might lose “highly-valuable employees,” causing “incalculable damage.” Another thing - It’s bad enough that the group of “priority guarantee” bondholders including Canyon Capital Advisors claims iHeart shouldn’t be allowed to move 100 million shares of Clear Channel Outdoor to a new subsidiary named “Broader Media.” They also claim that the value of those shares is not $516 million, as iHeart claims, but $1.4 billion. Under its covenants, iHeart’s not supposed to move more than $1 billion in assets around inside the company. The really big threat from the bondholders is that if they can make the claim of default stick and they feel like pushing things, more than $6 billion in debt held by them could be “immediately due and payable.” The countdown clock on that is just 60 days. iHeart might be forced to declare Chapter 11 bankruptcy (reorganization) to protect itself.


Meanwhile, over at the other BIG media company

Cash is precious at Cumulus.

With about $2.5 billion in debt and the stock less than two months away from a threatened delisting by the NASDAQ, CEO Mary Berner’s very much in triage mode. They’ve got to fix the most critical things first. She says they recently raised about $10 million by selling two stations from a divestiture trust and (as you read Friday morning) selling the company plane for about $6.1 million. But in one sense, handing over the keys to the plane cost the company. CFO J.P. Hannan says they took a “book loss” of $2.1 million, though the immediate $6.1 million in cash is handy. Berner also “avoided $8.5 million of cash outlay that would otherwise have expended in April,” to convert the LMA of San Jose/San Francisco’s KSJO (92.3) to a purchase. The ratings are disappointing and there’s not a sufficient return on investment to keep country “Nash 92.3” on that signal. Berner tells Wall Street “we will continue to explore other cash-generating, cash-saving” options. One of those was buying back $64.9 million of the company’s senior secured debt for $50 million. How did Wall Street react to the Q4 loss of $4.6 million, equal to 2 cents a share? Badly, at first. “CMLS” closed Thursday at 41 cents a share, but Friday morning, nobody wanted to buy until the price dropped to 30 cents. But on strong volume, it steadily climbed and eventually closed off 2 cents at 39 cents.

[voguy]

Add another radio group bailing out....

LINK

End of an era: CBS to sell its historic radio division

CBS plans to sell one of its legacy brands: CBS Radio.

"We will begin to explore strategic options," CBS Chairman and Chief Executive Leslie Moonves announced Tuesday during the company's investor day. "We will be prudent and judicious. We will take our time to make sure that we do it right."

The move represents a recognition that terrestrial radio is no longer a growth industry, particularly as major advertisers shift their spending to digital platforms.

However, the proposed sale is hugely symbolic because the broadcasting company was built on the back of its TV and radio stations, which have adapted and thrived over the decades as consumption patterns changed.

CBS Radio, launched in 1928, also represents one of the largest radio station groups in the nation, reaching an estimated 70 million consumers nationwide each week, according to the company's website.

The division owns and operates 117 radio stations in 26 markets, including six stations in Los Angeles, including KNX-AM 1070 and KCBS-FM 93.1.

-0-

This story was in the LA times. Here is where the CBS stations are located.... WiKI Link.
Or their Corporate Page.