iHeartMedia subsidiary iHeartCommunications postponed the maturity dates of most of its debt by three years and reduced the 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 rates, with approximately $4.8 billion, or 92.2%, participating in the exchange offer as of December 18. According to a press release on Monday (December 23), the “vast majority” of the debt has been extended by three years, and annual cash interest payments are expected to remain “relatively flat.”
Investors welcomed the financial breathing space the exchange offer provided. iHeartMedia shares rose 9.6% to $2.06 in afternoon trading after rising 15.7% to $2.175 earlier in the day. iHeartMedia’s stock price is down 22.7% year to date.
Ratings agency S&P Global said the debt restructuring “is tantamount to a default” because “lenders will receive less than what was originally promised, which would not offset adequate compensation.” Although the interest rates on the new debt will be higher, S&P believes ” The interest rates are significantly lower than what companies would pay for new capital under current market conditions and lower than what issuers with similar risk profiles would pay to raise new capital.” capital.
The agency downgraded iHeartCommunications’ rating to “SD” (selective default) from “CC” and lowered the issue grade rating of iHeartCommunications’ senior secured and unsecured debt to “D” from “CC”. Still, S&P Global acknowledged that the exchange was beneficial because “a realistic possibility of a traditional default exists” without a restructuring.
During an earnings call on November 7, iHeartMedia Chief Financial Officer Rich Bresler It said the exchange would help boost the company’s net leverage, which is the ratio of long-term debt (minus unrestricted cash) to earnings before interest, taxes, depreciation and amortization. iHeartMedia’s net leverage currently stands at 7.2, and Bresler said he expects that number to drop to “about 5.5” by the end of 2025 and to improve further to “about 3.2” by the end of 2028.
