iHeartMedia Implodes, Falls Into bankruptcy
iHeartMedia’s bankruptcy has been a long time coming. The company was ruined by a leveraged buyout led by Bain Capital. iHeart is still profitable and still making money, but they were loaded up with unpayable debts. This is practically identical to what happened to Toys ‘R’ Us, though unlike TRU, iHeart seems to have reached an agreement with creditors that will allow the company to be saved.
We care because these guys are noteworthy for carrying many conservative talk show hosts, including Rush and Hannity:
iHeartMedia, the country’s largest radio broadcaster with around 850 stations and a leading outdoor advertising company, is filing for bankruptcy after spending years trying to manage its $20 billion in outstanding indebtedness. (For some context, per that November statement, iHeartMedia was obligated to pay $1.8 billion in interest over that coming year.)
The company writes in a press release that it has reached “an agreement in principle with holders of more than $10 billion of its outstanding debt and its financial sponsors” that will essentially cut its debt in half, and that it has filed motions with the court to be allowed to operate normally through the restructuring. The bankruptcy follows, by two months, the bankruptcy of the country’s second-largest radio company, Cumulus, which offloaded $1 billion in debt.
iHeartMedia has spent the past several years attempting to deal with its financial burden, which weighed down what would otherwise seem to be, according to its revenues and operating incomes, a healthy company.
About 10 years ago, the amount paid for iHeartMedia, Inc. — $26.7 billion — was a particularly lofty example of a “leveraged buyout”; broadly, the term for purchasing a company by borrowing the money from banks, which issue those loans against the company’s cash and assets. The buyout was led by Bain Capital, the private equity firm founded by Mitt Romney in 1984, and Thomas H. Lee Partners. It was funded by a consortium of banks — Citigroup, Deutsche Bank, Morgan Stanley, Credit Suisse, Royal Bank of Scotland and Wachovia.