iHeartMedia Creditors Extend Forbearance Agreement
Summary
- iHeartMedia creditors agree to extend agreement to March 12th.
- iHeart is struggling with a possible bankruptcy filing.
- Negotiations have 3 business days to wrap up.
iHeartMedia (NASDAQ:IHRT) investors may find themselves in for a long weekend as the company and its creditors agreed to extend a forbearance agreement until March 12 at 11:59 PM. The original agreement expired on March 7 at 11:59 PM. iHeart made the new agreement public on March 8 via an 8K filing with the SEC.
iHeart is saddled with substantial debt and missed a payment last month, which brought the concept of bankruptcy closer to reality than it has been over the past year. iHeart has had continued pressure mounting because of its debt obligations, and various negotiations over the past year have not resolved the matter.
Active players in the story of late are Liberty Media ([[LSXMA]], [[LSXMK]]) and satellite radio provider SiriusXM (SIRI). Liberty and SiriusXM have teamed up to offer relief in exchange for a 40% stake in iHeart (20% to Liberty and 20% to SiriusXM). In an effort to gain more leverage, Liberty Media has acquired $400 million in iHeartMedia's debt. Currently the Liberty/SiriusXM offer would put $1.16 billion on the table. A term sheet Liberty produced outlines many of the nuts and bolts of the offer. The term sheet holds to many of the parameters iHeart was already working on with creditors, and thus could gain support. This is especially true when Liberty indicated earlier this week it was willing to offer more to get the deal done.
In my opinion, there is likely a path to the finish line that will involve Liberty and SiriusXM. These entities bring a lot to the table in terms of knowing the media space, which is not something some of the banking creditors possess on their own.
I see the initial extension to March 7, and this new extension to March 12, as an indication that negotiations are progressing to a level where the restructuring of iHeart can come to one aligned front and proceed efficiently, instead of a drawn-out fight with no winners.
These developments mean iHeart investors may have a long weekend of some form of worry. This makes a direct investment in iHeart a move that would carry substantial risk. The lower-risk investment play here (at this moment) is with Liberty and SiriusXM. If they pull off this deal, both could see upside in the very near term. If the deal does not materialize, SiriusXM and Liberty should not take much of a hit, and would simply put more money into share buybacks or perhaps other acquisitions.
No matter what transpires, iHeart as a consumer brand will still exist. The question is what the equity and debt holders will have at the end of these negotiations. Investors should be aware that, if an agreement is reached, it will take several months to get the matter approved by bankruptcy courts. Investors should also be aware that any plan thus far (Liberty's or otherwise) does not avoid bankruptcy as part of the solution. Stay tuned.
Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.
This article was written by
Analyst’s Disclosure: I am/we are long LSXMA, LSXMK, SIRI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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Comments (53)
iHeart Creditors Are Said to Be Open to Bids Including Liberty'shttps://bloom.bg/2HHZVLD
While Liberty isn’t mentioned directly in the restructuring documents, the agreement leaves room for potential bids by third parties and analysts have said iHeart holders probably haven’t heard the last of Liberty’s offer.Speaking on a March 1 earnings call, Liberty Chief Executive Officer Greg Maffei cited “substantial synergies” between the ailing iHeart and two other Malone investments: the majority-owned satellite radio giant SiriusXM Holdings Inc. and Pandora Media Inc., the online music company where Liberty took a minority position last year. IHeart has its own streaming service. IHeart and Pandora, meanwhile, could share advertising technology and sales forces, Maffei said. IHeart’s is larger than those at Pandora and Sirius, he said.http://bit.ly/2tPFHNZ
New debt of $5.75B plus (92M current shares x $.59 x 100)
That is more than 10X EBITDA---which is a big premium to where ETM is trading right now
Whomever is buying is going to loose some dough........
Any insights would be appreciated