July 31, 2019
Formerly known as Clear Channel Media, iHeartMedia (iHeart), is one of the nation’s largest diversified media, entertainment and data companies, owning more than 850 radio stations, a music-streaming service with over 100 million users as well as a live-concert division. Acquired in a leveraged-buyout transaction during the financial crisis of 2008, iHeart encountered significant and unexpected economic and industry-specific challenges including internet advertising and on-demand streaming media. These factors curtailed global advertising spending and limited iHeart’s ability to generate cash flow and grow the businesses. As a result, iHeart’s capital structure and its approximately $16 billion of funded debt needed to be proactively addressed. Notwithstanding the company’s substantial debt, iHeart was committed to maintaining its vast business operations that generated considerable amounts of cash flow, just not an amount sufficient to continue to service its sizeable debt and ongoing obligations. Following years of negotiations and the pursuit of various potential out-of-court resolutions, iHeart ultimately filed for Chapter 11 protection in the Southern District of Texas to implement the terms of a pre-negotiated restructuring arrangement that had creditor support in an amount in excess of $10 billion, as well as the support of the company’s equity sponsors. iHeart’s chapter 11 cases were among the largest in U.S. bankruptcy history.
Working with iHeart’s team of turnaround professionals – Kirkland & Ellis as legal counsel, Moelis & Company as investment banker, and Alvarez & Marsal as the company’s financial adviser – Stretto provided customized banking and deposit-management services to support the company’s restructuring efforts. Stretto outlined and proposed an effective banking solution that met iHeart’s particular deposit-management needs and worked with the company and its professionals to implement the approach. Recognizing that the Office of the United States Trustee (UST) objected to the continuation of iHeart’s existing cash-management structure, Stretto leveraged its nationwide network of financial institutions to identify a banking partner that could provide the company with an investment vehicle compliant with section 345 of the United States Bankruptcy Code. iHeart valued Stretto’s strategy, and its consensual resolution of the UST’s objection, as it allowed the company to avoid further litigation expenses, eliminated uncertainty, minimized distractions for iHeart’s management team, and helped improve its relationships with the UST. Throughout the duration of the engagement, iHeart had access to the deposits as needed and maintained a competitive rate of return on its deposits; ensuring that liquidity was allocated toward maintaining the company’s normal business operations. iHeart’s operational infrastructure remained functional during the entirety of the chapter 11 cases, and the company was able to continue to invest in its businesses and acquire new digital technologies and assets that will solidify its position as the largest radio broadcasting network in the United States. As a result of its chapter 11 cases, iHeart was able to restructure their balance sheet and financial agreements while lowering interest rates on loans and bonds, successfully reducing their debt from $16.1 billion to $5.75 billion.