Report: Cool Remix For iHeartMedia Debt

iHeartMedia — which is juggling $21 billion of debt left from its private equity buyout — has a novel plan to cut its debt payments and help persuade its lenders to give it more breathing room.

According to the NY Post, the company has bought a sizable portion of its unsecured debt and is planning to convert it into equity, which would lower its interest payments to the point that it would reach breakeven, said a source.

That, in turn, would help the company restructure the rest of its debt and extend maturities on more senior loans, the source added. Calls for comment from iHeartRadio were not returned.

iHeartRadio was taken over in a nearly $18 billion buyout at the peak of the market in 2008.

With traditional radio declining and most of its cash going toward debt payments, iHeartRadio is facing mounting losses. The company is projected to lose $50 million this year, $80 million next year and $120 million in 2017, the source said. And iHeartRadio’s cash pile, which stood at $380 million as of Sept. 30, is dwindling.

As of Sept. 30, 2015, iHeart had approximately $20.8 billion in consolidated debt. Debt held at iHeart was $15.9 billion and consisted of:

• $6.3 billion secured term loans due 2019;
• $190 million secured receivable based credit facility due 2017;
• $6.3 billion secured PGNs, maturing 2019-2023;
• $1.7 billion in senior unsecured 12% cash pay / 2% PIK notes maturing in February 2021;
• $730 million senior unsecured 10% notes due 2018 (net of FinCo holdings of $120 million);
• $668 million senior unsecured legacy notes, with maturities of 2016-2027 (net of FinCo holdings of $57 million.)

Debt held at Clear Channel Worlwide Holdings was $4.9 billion and consisted of:

• $2.7 billion in senior unsecured 6.5% notes due 2022;
• $2.2 billion in subordinated 7.625% notes due 2020.

However, iHeartRadio can become cash-flow positive if it converts $2.4 billion in unsecured debt — for which it pays more than $100 million in annual interest — into equity.

If the company is able to convert enough debt to break even, it has a shot at convincing lenders to extend its debt maturities, the source said.