One of the US music business’s most important media partners has admitted that it may go bust before the end of 2017.
iHeartMedia, which owns iHeartRadio, has long been the subject of Wall Street speculation due to its massive debt load.
The company, run by Bob Pittman, is shouldering a debt of approximately $20 billion – largely thanks to a $24bn leveraged buyout of billboard advertising giant Clear Channel Communications Inc, by private equity backers Bain Capital and Thomas H. Lee Partners in 2008.
Nearly $350m of that debt is due to be paid this year, with another $8.3bn to be satisfied in 2019.
In an 8K submission to the SEC dated Thursday (April 20), iHeartMedia reported its preliminary fiscal results for the three months ended March 31 this year.
It said its consolidated revenue for the period stood at $1.33bn, with a consolidated operating income of $114.1m.
“management anticipates that our financial statements for the three months ended March 31, 2017 will include disclosure indicating there will be substantial doubt as to our ability to continue as a going concern for [the subsequent 12 months].”
iHeartMedia SEC filing dated April 20
However, contained within the filing was a line scary enough to put shareholders’ iHearts in their iMouths:
“Based on the significance of the forecasted future negative cash flows… management anticipates that our financial statements to be issued for the three months ended March 31, 2017 will include disclosure indicating there will be substantial doubt as to our ability to continue as a going concern for a period of 12 months following the date the first quarter 2017 financial statements are issued as a result of uncertainty around our ability to refinance or extend the maturity of our receivables based credit facility, to achieve our forecasted results, and to achieve sufficient cash interest savings from the pending Exchange Offers and Term Loan Offers.”
According to financial reports filed Friday (April 21), the company’s creditors are blocking attempts to restructure its debt.
A betting individual, then, might suspect that the ‘going concern’ announcement is a tantamount to threat from iHeart to bond holders – suggesting that, should they push the company to the brink over its huge debt, it would have little choice but to file for Chapter 11 bankruptcy this year.
Either way, this could all be very bad news for music business rightsholders.
iHeartMedia boasts over quarter of a billion monthly listeners in the US market, with over 85m social followers.
It serves over 150 local markets through 858 owned radio stations, with the iHeartRadio app – which has been downloaded more than 1bn times – reaching 100m registered users.