iHeart ends Q2 with $20.4 billion of debt; confident of extending receivables facility before year-end maturity

By Paul Deckelman

New York, Aug. 3 – iHeart Media, Inc. ended the 2017 second quarter with some $20 billion of consolidated debt on its balance sheet, about unchanged from where its debt levels had stood at the beginning of the year, the company said Thursday.

The San Antonio, Texas-based radio broadcasting, live entertainment and outdoor advertising company – which for some months now has been in the midst of an effort to convince its bondolders and holders of its term loan debt to sign on to exchange offers for those securities aimed at restructuring those obligations – also faces a Dec. 24 maturity deadline for its receivables based credit facility, its nearest maturity.

But its corporate treasurer, Brian Coleman, expressed confidence that the facility would be extended.

Coleman, who is also a senior vice president, told an analyst on the company’s conference call following the release of its latest financial results that “with respect to the ABL, nothing really has changed since the last conference call. We believe that the ABL, given the nature of that facility, is something that can be extended and we’ll continue to work towards extending it prior to its maturity.”

According to information contained within the company’s earnings announcement, that facility, which matures on Dec. 24, has a borrowing base of $491.4 million, with $305 million of that having been borrowed by the company as of the end of the second quarter on June 30. The company at that time also had outstanding some $42.3 million of letters of credit, bringing availability under the facility down to $144.1 million at June 30.

However, the company borrowed an additional $60 milli8on from that facility on July 31, bringing total borrowings to $365 million, not including the letters of credit outstanding.

Debt levels hold steady

iHeart’s president, chief operating officer and chief financial officer, Richard Bresler, said on the call that as of June 30, the company’s total debt was $20.4 billion, “basically flat with year-end 2016.”

Some $15.454 billion of that debt had been issued by iHeart Communications, Inc. the company’s principal subsidiary, which runs its radio broadcasting, live entertainment and other media activities, while the other $5.119 billion had been issued under Clear Channel Outdoor Holdings, Inc., the company’s outdoor advertising business.

Bresler said that iHeart Media’s weighted average cost of debt was 8.7% as of June 30. Consolidated cash was approximately $260.5 million as of June 30.

The company’s secured leverage ratio of net debt as a multiple of trailing 12-month adjusted EBITDA was 7.5 times, with total leverage at 12 times.

Cash interest expense for the first six months of the year was $876 million – its largest single use of cash – and it expects cash interest expense in 2017 to total $1.8 billion, including $549.9 million in the third quarter and $337.4 million in the fourth quarter.

Bresler said that Clear Channel Outdoor ended the quarter with $163.1 million in cash, with its senior leverage ratio of 4.4 times and its consolidated leverage ratio of 8.3 times.

During the six months ended June 30, Clear Channel Outdoor used $183.4 million in cash for interest and paid dividends totaling $282.5 million, including $254 million received by iHeart Media.

Request for specifics declined

During the question-and-answer portion of the conference call that followed Brelser’s formal presentation of the company’s quarterly and six-month results, Coleman declined to estimate what the company’s current cash balance – figuring in a sizable cash interest payment made at the beginning of August – might be.

He also declined to get into specifics as to what kind of levers the company might be able to pull to improve its liquidity, telling a questioner that “we’ve added a lot of disclosure to the financial statements about the efforts the company undertakes with respect to creating additional liquidity.”

He added “we certainly are aware of the liquidity situation – but I ‘m not going to get into any specifics beyond the additional disclosure that’s been put in our financial statement.

Suffice it to say the company continues to focus on its levers. We’ve looked at liquidity and have addressed the issue for a number of years and will continue to do what we can to ensure that there is adequate liquidity going forward, to the extent that we can.”

In response to a question of what iHeart might consider to be a sustainable capital structure, the treasurer also declared that “we talk about the desire of the company to have a sustainable capital structure post – any discussions that we have. We haven’t defined those metrics, and I don’t think it is a point, probably it’s a range. That’s not something we’re prepared to discuss at this point in time.”

Exchange offers extended, again

Since mid-March, iHeart Media has been trying to get its bondholders to agree to exchange certain series of its outstanding debt securities for new securities of the parent company and its subsidiaries, along with concurrent consent solicitations with respect to the terms of the existing notes, and has made similar offers to participating lenders to amend its outstanding term loan D and term loan E borrowings under its senior secured credit facility. The exchange offers have been amended and extended several times since then.

Separately from its earnings announcement, the company said on Thursday that it had once more extended the private exchange for five series of priority guarantee notes and senior notes due 2021 and its term loan D and term loan E facilities in connection with the proposed debt restructuring. The exchange offers will now continue until 5 p.m. ET on Aug. 18, extended from the former deadline of 5 p.m. ET on Aug. 4 (see related story elsewhere in this issue).

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