(Reuters) A group of iHeartMedia Inc (IHRT.PK) lenders has signed a cooperation agreement to oppose the debt overhaul of the largest owner of U.S. radio stations, presenting a threat to the company's bid to avoid bankruptcy, people familiar with the matter said.
The move shows how iHeartMedia, which says it has more than a quarter of a billion monthly radio listeners in the United States, is struggling to find a solution that would significantly slash its $20 billion debt pile outside of bankruptcy court.
iHeartMedia needs more than 50 percent of the holders of its term loans to approve a debt swap for it to complete its proposed overhaul. iHeartMedia has already pushed back the deadline for its loan swap offer twice, and sweetened it once before. The latest deadline expires later on Friday.
The creditors who signed the pact told iHeartMedia they represent more than half of the term loans holders, and are seeking to put pressure on the company to either significantly improve on its loan swap offer, or propose a new way to tackle the debt altogether, the sources said this week.
The sources asked not to be identified because the deliberations are confidential. iHeartMedia declined to comment.
"Bondholders and creditors don't feel they've been offered enough," said Anthony Canale, head of high yield research at research firm Covenant Review. "The company's behavior has been extremely aggressive, and may have resulted in some hurt feelings and emotions that may be further complicating this."
iHeartMedia in March launched a pair of debt exchanges to cut its debt, with one swap targeting a series of bonds and the other swap focusing on term loans. Getting a deal on the term loan swap is a precondition for clinching any swap for the bonds.
The company could again extend the deadline for the term loan swap and sweeten terms for the lenders in the hope of garnering more support, as it has done before.
Credit ratings agency Fitch Ratings estimates that full participation in the loan and bond swaps would cut the company's debt pile by up to $4.3 billion.
iHeartMedia said on Thursday that it anticipates it will disclose "substantial doubt" in its next quarterly earnings report about its ability to continue as a going concern, because of its debt maturities and uncertainties around the swaps.
Buyout firms Bain Capital LLC and Thomas H. Lee Partners LP acquired iHeartMedia in 2008 for $24 billion.