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Judge Rules in Favor of iHeartRadio in Creditor Suit
RADIO ONLINE | Tuesday, May 24, 2016 |
Texas State District Judge Cathleen Stryker has ruled in favor of iHeartMedia's digital music service, iHeartRadio, which went to trial to sue creditors who are attempting to declare $6 billion in senior notes in default. In a statement, the company said, "Today, the State District Court in Bexar County, Texas ruled in our favor when it determined that our contribution of Clear Channel Outdoor Holdings, Inc. stock to our subsidiary Broader Media, LLC was a permitted investment under our financing agreements."
The statement continued, "The strong performance of our operating business provides us with the flexibility to manage our capital structure in a prudent manner. In full compliance with our financing agreements, we will continue to evaluate opportunities to strengthen our balance sheet. We look forward to constructive discussions with our lenders as we continue to position iHeartMedia for long-term growth."
The company had shifted $500 million in shares, or 100 million shares of Class B common stock of Clear Channel Outdoor Holdings from Clear Channel Holdings to Broader Media LLC (both wholly-owned subsidiaries) that is an "unrestricted subsidiary" under the Indentures. iHM maintained that the Contribution was made in full compliance with all of the provisions of the Indentures and the Holders had no basis to issue the Notices.
A group of 15 creditors including D.E. Shaw, Canyon Capital, Franklin Advisers and Franklin Mutual contended that the stock transfer constitutes a violation of debt covenants, and thus may accelerate the payment due date of up to $15 billion within 60 days of the notices. The senior creditors in February threatened to call defaults on about $6 billion in priority guarantee notes if the company didn't roll back the asset shift.
The senior creditors had complained iHeart's transfer of Clear Channel Outdoor Holdings shares to a different subsidiary violated loan terms and drained assets that could be used to repay roughly $423 million in debt that is due in the next two years on $20 billion in debt.
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