A debt restructuring proposal for iHeart Media's debt fell on deaf ears. After hearing nothing but crickets the first time around, the company has come up with a new offer that incrementally sweetens the deal for holders of priority guarantee notes.
The company already extended the offer once, when no noteholders had responded to the first proposal as of April 7. Holders of a paltry $3.1 million in notes responded after the extension.
Broadcast radio and entertainment provider iHeartMedia and related entities are trying a second time to restructure some $14.56 billion in debt - much of the company's $20.37 billion in total debt.
The capital structure remodel takes the form of separate exchange offers for $6.3 billion in term loans and $8.26 billion in six series of notes and guarantee notes.
The debt originates in a 2008 leveraged buyout by Thomas H. Lee Partners and Bain Capital.
The company is offering debt holders a chance to swap out existing debt for new debt, equity and ownership in CC Outdoor Holdings, or CCO, which will hold a 90% interest in Clear Channel Outdoor Holdings (CCO) - Get Report, according to a pair of Wednesday statements.
The original proposal comprised separate multi-scenario exchanges for term debt and for note debt. The scenarios gave investors a better deal if more investors participated. Few cared to.
The new April 13 proposal, which extends the deadline from April 21 to April 28, offers the same incentive for both groups of lenders at the low and mid-participation scenarios.
Term Loan D and E lenders were originally offered $830 for each existing $1,000 note in the mid scenario and $880 in the low scenario. Now they are being offered $900 at both participation levels.
Holders of all five series of guarantee notes are being offered the same increase from $830 and $880 to $900 for each $1,000 note they hold.
In each case the current maturities, ranging from 2019 to 2023, will be extended two years.
The offer remains the same for holders of the senior notes due 2021, who will receive $350 in 2023 notes for each original $1,000 note.
San Antonio-based iHeartCommunications, a subsidiary of iHeartMedia, closed out a $738 million debt swap offer in February, but that did little to deal with the amount of debt the new double swap contends with.
It also remains unclear how much the company can deleverage even with its current proposals.
Fitch Ratings director and analyst Patrice Cucinello told The Deal at the time of the first proposal that if security and term loan exchanges took place at the highest participation levels, the result would be a net $4 billion reduction in the company's debt.
The new proposal would take even less off the table.
Fitch regarded the plan as a distressed exchange and said in a Feb. 15 note that the deal might buck a trend toward fewer defaults in media.
"iHeart has been carrying high leverage since its LBO in 2008 and faces secular declines in radio markets," the note said.
"Historically, [distressed-debt exchanges] aren't always a panacea--nearly 40% of companies completing DDEs since 2008 have defaulted again. In addition, roughly 60% of those companies with a second default action resulted in a bankruptcy."