iHeart Restructuring Complete, Expected to Lead to IPO or Sale
The completion of a bankruptcy restructuring by iHeartMedia Wednesday is expected to be followed by a sale or public offering for the broadcaster and improved health for the radio industry as a whole but isn’t expected to lead to iHeart binge-buying stations, radio attorneys, consultants and analysts told us. The restructuring process reduced iHeart’s debt by more than $10 billion, it said in a news release Monday. “The perception (and reality) that iHeart is now an independently functioning company out from under the scrutiny of bankruptcy court will greatly improve its image and the image of radio, too,” emailed media broker Robert Heymann, from the Chicago office of Media Services Group. The FCC OK'd the restructuring plan last week (see 1904240054).
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After the successful restructuring, iHeartMedia’s debt is down to $5.75 billion from $16.1 billion, the release said. The company has also fully separated from former advertising subsidiary Clear Channel Outdoor Holdings, which began trading as an independent company Wednesday. “IHeartMedia enters this next phase of growth as a multi-platform audio company with a vastly improved financial profile,” said iHeart CEO Bob Pittman in the release. IHeartMedia didn't comment.
With the bankruptcy complete, the former debt holders who now own the company are expected to seek to unload it either through a sale or public stock offering, said S&P Global analyst Justin Nielson. Stakeholders in Tribune -- currently in mid-deal with buyer Nexstar -- acted similarly after its bankruptcy, he said. Liberty Media was seen as a potential buyer for iHeart last year, and there aren’t many other potential deal partners for the company as a whole, Nielson said. Entercom and Cumulus aren’t in financial shape to buy iHeart, and the only other likely option would be investors from outside the industry as in Apollo’s buy of Cox stations, he said. A initial public offering could also be possible, Nielson said; iHeart filed documents at the SEC in April that would allow an IPO to take place.
The restructured company opposed proposed FCC ownership rule changes to FM and AM earlier this week that iHeart said could lead to a “mass-divestiture” of AM stations (see 1904300203). The FCC should relax ownership rules for AM stations only, it said. Since iHeart owns many AM stations, such a rule change could make it’s assets more valuable, an industry official said. Those rule change proposals are uncertain enough that they're unlikely to influence the company’s behavior, Heymann said. “I do not think they will wait for FCC ownership deregulation since it is such an unknown at this time,” he said.
Several radio industry officials said they don’t expect iHeart to begin trying to buy new stations post-bankruptcy. The company could seek “very selective strategic acquisitions on a market by market basis” if regulations allow it, Heymann said. Broadcasters don’t view iHeart as a likely buyer, a radio attorney said.
That the company's out from under bankruptcy is a positive for the whole radio industry, said radio consultant John Lund. While facing bankruptcy, iHeart was widely seen as offering bottom-floor prices and pulling down ad rates in every market it had stations, industry officials said. “A healthy iHeart’s not going to be in that position,” Lund said. As the biggest radio group, iHeart’s financial health was seen as discouraging outside investment, analysts said. “Smart money, by definition, will judge an investment in radio on its merits,” said Heymann. “The optics of iHeart being in bankruptcy were very bad for the industry.” A post-bankruptcy iHeart won’t affect everyone, said radio attorney Dawn Sciarrino. For her smaller and mid-size radio clients, the status of iHeart “doesn’t change much,” she said.