iHeartMedia Reduces Debt Load, Extends Maturity Dates

iHeartMedia subsidiary iHeartCommunications pushed back the maturity date of much of its debt by three years and reduced its amount of long-term debt by $440 million. 

In November, the company’s debt holders were given the opportunity to exchange existing debt for new debt with higher interest — and approximately $4.8 billion, or 92.2%, of them participated in the exchange offer that ended on Dec. 18. The end result is that the “vast majority” of the debt’s maturities have been extended by three years and annual cash interest payments are expected to remain “relatively flat,” according to a Monday (Dec. 23) press release.

Investors welcomed the financial breathing room provided by the exchange offer. Shares of iHeartMedia were up 9.6% to $2.06 in mid-afternoon trading after rising as much as 15.7% to $2.175 earlier in the day. iHeartMedia’s stock price has declined 22.7% year to date.

Ratings agency S&P Global called the debt restructuring “tantamount to a default” because “lenders will receive less than originally promised without offsetting adequate compensation.” Even though the new debt carries a higher interest rate, S&P believes “the rates are well below what the company would be required to pay for new capital under current market conditions and what an issuer with a similar risk profile would have to pay to raise new capital.”

The agency lowered iHeartCommunications’ rating to “SD” (selective default) from “CC” and dropped the issue-level rating on iHeartCommunications’ senior secured and unsecured debt to “D” from “CC.” That said, S&P Global admitted the exchange was beneficial because without the restructuring “there was a realistic possibility of a conventional default.” 

During a Nov. 7 earnings call, iHeartMedia CFO Rich Bressler said the exchange would help the company’s net leverage, which is the ratio of long-term debt (less unrestricted cash) to earnings before interest, taxes, depreciation and amortization. iHeartMedia’s net leverage currently stands at 7.2 and Bressler said he expected that number to fall to “about 5.5” by the end of 2025 and further improve to “about 3.2” by the end of 2028.