IHeart has joined the sub $1 stock club. It broke down this week and is trading today at .82 cents. Can another Bankruptcy be on the horizon?
-
Get involved.
We want your input!
Apply for Membership and join the conversations about everything related to broadcasting.
After we receive your registration, a moderator will review it. After your registration is approved, you will be permitted to post.
If you use a disposable or false email address, your registration will be rejected.
After your membership is approved, please take a minute to tell us a little bit about yourself.
https://www.radiodiscussions.com/forums/introduce-yourself.1088/
Thanks in advance and have fun!
RadioDiscussions Administrators
IHeart stock in a death spiral?
- Thread starter RadioGuy1864
- Start date
Big drop of nearly 60 percent in the past 3 weeks. Investors not happy with that rosy earnings report?
Also they are down over 96 percent since June 2021 when the stock was at $27.36.
Also they are down over 96 percent since June 2021 when the stock was at $27.36.
Google is an amazing thing:
From Nasdaq/Zacks Investing: "Broadcast Radio and Television group has been an avoid over the past five years, underperforming the S&P 500 dramatically and ranking in the bottom 35% of industries"
Here is the whole story:
Analysts have had the stock at "sell" since 2019, so none of this is new:
From Nasdaq/Zacks Investing: "Broadcast Radio and Television group has been an avoid over the past five years, underperforming the S&P 500 dramatically and ranking in the bottom 35% of industries"
Here is the whole story:
Analysts have had the stock at "sell" since 2019, so none of this is new:
Last edited:
Not in the near term. The company has about $770 million in cash and cash equivalents (as of December 31). The company also paid down $200 million in debt last year.
iHeart does have significant debt, but it does not come due until 2026. So the chances of a bankruptcy are quite low at least until 2026 or 2027.
Funny....Bob & Rich are the most recent sellers of stock, back when it was above $1. Smart move:
www.wallstreetzen.com
When you look at who owns iHeart stock, it's mostly institutional investors and insiders. They all know the game. Long ball.
Iheartmedia Stock Ownership - Who Owns Iheartmedia in 2026? | WallStreetZen
When you look at who owns iHeart stock, it's mostly institutional investors and insiders. They all know the game. Long ball.
I read somewhere that Bob only had 1% of total shares anyway.Funny....Bob & Rich are the most recent sellers of stock, back when it was above $1. Smart move:
Iheartmedia Stock Ownership - Who Owns Iheartmedia in 2026? | WallStreetZen
When you look at who owns iHeart stock, it's mostly institutional investors and insiders. They all know the game. Long ball.
The problem for any traditional media stocks, is they can't claim there is any hope of future growth. The last hope was digital, but that topped out already.
If you scroll down the linked article it says 3.42%.
In the bankruptcy, they had to give the lenders something tangible, and that was stock.
Is that prior to selling shares or after?
But clearly shares in even media companies that are holding their own still have little if any potential for growth.
At least not levels of growth that stock analysts expect.
Paramount Global lost 50% of its value in the last year. Even after selling off radio. Same with Warner Media, and they never owned radio. So obviously radio isn't the only hole in the dyke.
I've said here many times on this very site that with the exception of Netflix, all media companies stock shares are depressed.
That said; are traditional media shares whose legacy business is traditional media (TV or radio) the most depressed? Absolutely.
From Bloomberg:
www.bloomberg.com
My guess (and it's only a guess) is iHM's creditors are anticipating a note exchange offer, whereby they would be asked to exchange their current notes at some percentage of par value (it may or may not be the 70 to 75 range in which the incumbent notes have recently traded) for longer dated notes with a higher interest rate.
The question then becomes whether they feel more would be gained by taking the company through another chapter 11 proceeding.
I'll share my own thoughts regarding iHM's financial condition in the next day or two.
IHeart Creditors Including Pimco Tap Advisers as Revenue Slumps
Some creditors to iHeartMedia Inc., including Pacific Investment Management Co., have retained financial and legal advisers as they eye a drop in revenue at a time when other indebted media companies are pushing ahead with debt restructurings.
www.bloomberg.com
My guess (and it's only a guess) is iHM's creditors are anticipating a note exchange offer, whereby they would be asked to exchange their current notes at some percentage of par value (it may or may not be the 70 to 75 range in which the incumbent notes have recently traded) for longer dated notes with a higher interest rate.
The question then becomes whether they feel more would be gained by taking the company through another chapter 11 proceeding.
I'll share my own thoughts regarding iHM's financial condition in the next day or two.
For review, here's the recent deal done by Cumulus
Cumulus Gets Three More Years To Repay $326 Million To Lenders.
So Cumulus creditors will get 80% of what they're owed three years later. That's a better deal than 70-75% range.
Here's what we know: Profitability of radio stations won't improve without a major change in their business model. The problem is the business model, which is based on size (over 800 stations), isn't improving profitability. The company is #1 in revenue according to BIA. But the huge profits from its major markets are not enough to cover the losses in the small markets. They could chop off the money losers, but that would diminish the size of their sales platform. It's a catch 22.
Cumulus Gets Three More Years To Repay $326 Million To Lenders.
So Cumulus creditors will get 80% of what they're owed three years later. That's a better deal than 70-75% range.
Here's what we know: Profitability of radio stations won't improve without a major change in their business model. The problem is the business model, which is based on size (over 800 stations), isn't improving profitability. The company is #1 in revenue according to BIA. But the huge profits from its major markets are not enough to cover the losses in the small markets. They could chop off the money losers, but that would diminish the size of their sales platform. It's a catch 22.
How can they ever pay that back.
Heck, how could Cumulus or iHeart even do that without taking a massive financial bath? There's little chance that anyone would be willing to pay anything for small market stations, especially with Alpha's very public death spiral ongoing.
Maybe the only realistic outcomes are to have these stations operate as mere rebroadcasters of larger market signals... or collapsing the smaller markets into larger adjacent markets... or have the federal government reimburse the operators for license surrendering. Or some combination of the three. Because if the economic model for small market radio is evaporating—as has been mentioned on here—there may not be any way that these stations can survive. And dragging down the larger operators will make it much, much worse for everyone.
Some (not all!) small market stations can be operated quite profitably so long as they are not strangled by exorbitant debt service. Small market stations, if run properly, have great relationships with local businesses and organizations.
I think we'll continue to see commercial FM signals incrementally get sold and repurposed as non-commercial stations. Over time, a larger percentage of listening share will be concentrated within a smaller number of stations, too.
The cash-for-clunkers license surrender concept is interesting to ponder, but at the end of the day, I am not convinced this would allow per station cash flow to improve (as compared to not implementing such a concept). Such a measure might even prove counterproductive. Such a use of federal monies may also be viewed by the general public as an inappropriate bailout, especially if spectrum associated with surrendered licenses is unable to be sold.
Last edited:
Sorry for being a little late with this analysis.
My thoughts:
- iHM has a decent liquidity position. There is no risk of a cash crunch until note maturities come due. $361 million of cash on hand at 3-31-24 compares favorably to the 3-31-23 balance of $187.9 million and the 3-31-22 balance of $279.7 million.
- The company has access to a $450 million ABL line of credit under which no borrowings are currently outstanding. There are $24.3 million of availability takedowns for letters of credit, leaving just over $425 million in available draw ability.
- There is no risk of any financial maintenance covenant default at this time. All Term Debt and Notes balances are maintenance covenant free. The ABL Facility is only subject to maintenance covenant testing if & when unused availability falls below the greater of (a) $40 million or (b) 10% of the aggregate commitments under the ABL line of credit.
- Between the company's $2.265 billion in term debt maturing May 1, 2026, its $800MM in senior secured 6.375% notes due May 1, 2026, its $750MM in senior secured 5.25% notes due August 15, 2027, its $500MM in senior secured 4.75% notes due January 15, 2028, and its $500MM in senior secured 4.75% notes due January 15, 2028, it effectively has nearly $4.32 billion in senior secured debt outstanding.
- There are presumably cross-default / cross-acceleration provisions, so in the event one tranche of the above debt goes into an Event of Default, *all* of the above instruments can be immediately called, thereby nullifying the maturity date differences.
- The trading range in the 70s for the term debt and senior secured notes is reasonable based on my analysis, as explained below.
- The senior unsecured 8.375% notes of $916MM due May 1, 2027 are largely worthless. It is worth noting, however, that the company did make some sizable discounted buybacks of these notes in both 2022 and 2023.
- About $330 million of notional 8.375% unsecured notes were repurchased for $299 million in 2022, and $204 million of notional 8.375% unsecured notes were repurchased for $147 million in 2023. If I were a senior secured noteholder, I'd be very unhappy with such use of cash, although it does appear these purchases were permitted by the Term Loan Credit Agreement and by the Notes Indenture for the senior secured notes. No such repurchases occurred in Q1 of 2024, to my knowledge.
- Given risk of future unlevered cash flow slippage, my business valuation would probably be near or just above $4.0 billion, equivalent to roughly 5.0x last 8-quarter annualized Adjusted EBITDA. (The last 8-quarter annualized measurement technique is designed to apply equal weightings to political and non-political advertising years.)
For Q2 through Q4 of 2024, I am projecting $590MM of unlevered free cash flow, $541.5MM in 2025, $595.0MM in 2026 (election year), $460.3MM in 2027, $505.8MM in 2028 (election year), $391.2MM in 2029, $429.9MM in 2030 (election year) and $332.6MM in 2031.
As a point of comparison, unlevered free cash flow equaled $449.8MM in 2020, $654.1MM in 2021, $790.7MM in 2022, and $637.1MM in 2023. First quarter only results include $83.1MM in Q1-21, $121.6MM in Q1-22, $51.1MM in Q1-23 and $82.0MM in Q1-24. Generally speaking, odd numbered years should be compared to other odd numbered years and even numbered years should be compared to other even numbered years due to political ad spend influence.
Adjusted EBITDA, for those interested in that measure, includes results of $539MM in 2020, $811MM in 2021, $950MM in 2022, and $697MM in 2023. First quarter only results include $102MM in Q1-21, $145MM in Q1-22, $94MM in Q1-23 and $105MM in Q1-24. Note that the Q1-24 result is considerably below the Q1-22 result (the most recent preceding even numbered year).
Question: What might a pro forma debt stack look like?
I will focus on funded debt since I presume the Company has no intention of drawing down its ABL Facility.
As noted earlier, the company has nearly $4.32 billion in senior secured debt obligations and $916MM in unsecured debt obligations outstanding.
I believe a new "Term Loan B" (an industry term for an amortization-free or amortization-light term loan with little or no financial maintenance covenants), if sized properly to future projected cash flows, would probably price near 8.50%. Based on that pricing, and solving for 50% theoretical debt clearance (using cash flow after interest expense) by the year 2031, a maximum loan commitment of $3.32 billion could be supported. That equates to a multiple of 76.9% of the current senior secured debt stack. So, this certainly falls within the realm of recent trading levels of the current senior secured debt instruments.
Question: What would the holders of the 8.375% unsecured notes receive in a restructure?
Just like I said with Audacy's pre-reorganization unsecured debt, this paper - at best - has "nuisance value" and little else. I would expect holders of this paper to receive little to zero consideration in a reorganization scenario. Senior secured debt holders are unlikely to graciously extend any monetary "tip" to them for playing nice in the sandbox given the large buybacks of unsecured debt that already happened in 2022 & 2023.
Question: Does the publicly traded common stock have any real value?
Remember that claims of senior secured debt holders come first, unsecured debt holders come second, preferred equity holders come third, and common equity holders come dead last under U.S. Bankruptcy law.
The currently issued common shares are worthless, and anyone taking a long position in iHM stock right now is making a very poor decision, in my opinion.
Question: When might a reorganization occur?
The 2024 annual audited financial statements will be able to be issued at least one year prior to the earliest debt maturity in May 2026, so I would not expect any restructuring proposal to be put forth - or for a bankruptcy filing to occur - sooner than summer 2025.
In Audacy's case, various debt payment dates received a number of short-term extensions before their BK filing ultimately occurred. That was an unusual occurrence but is one that cannot be ruled out here.
Question: Is the company at risk of going into Chapter 11? Didn't they just reorganize in Chapter 11 in 2019?
Given the several different debt tranches involved, with instruments ranging from an ABL facility, to senior secured term debt, to senior secured notes, to unsecured notes, I think ability to institute a debt reorganization on an out-of-court basis is low.
The company, its stakeholders, and their respective advisors most likely will use best efforts to mutually agree to the major tenets of a Plan of Reorganization before any actual BK filing is made by iHM. Any such BK filing would likely occur in second half of 2025 or first half of 2026.
While the 2019 Plan of Reorganization, which took effect May 1, 2019, did wipe a lot of incumbent debt off the company's balance sheet (a $16 billion debt load was reduced to between $5 billion and $6 billion), the financial projections model on which the new debt structure was based contained future earnings assumptions that proved to be substantially incorrect, as actual earnings performance has consistently fallen short of that thesis. The advertising fallout from COVID and evolving media consumption habits have worked against companies such as iHeartMedia, which heavily rely on "linear" broadcasting for a large portion of revenue.
I do not anticipate as high a percentage of debt being wiped out as part of the next reorganization as the prior one. I guestimate the company's total debt load will need to be reduced by nearly 40 percent as compared to current levels. Today, the company has $4.3 billion in senior secured debt and $0.9 billion in unsecured debt. I believe a new plan of reorganization would leave the company with $3.3 billion in senior secured debt and no unsecured debt.
Question: Might the company look to sell assets?
This is tough to answer, because financial statements are broken down into only three broad reportable segments (I think it's three, could be four), and the company owns $6.76 billion in total assets as of 3-31-2024 if we assume their book carry values are valid. (I personally think the company is valuing its Intangible assets at excessively high amounts and that further large Impairment charges will ultimately need to be taken.)
There are probably some assets that are contributing little to no cash flow that likely could be monetized at an attractive multiple, but such "one off" transactions are probably not going to raise enough money to move the proverbial needle in any sort of transformational way.
The company appears to view the iHeartRadio streaming platform and its linear radio business as integral & complimentary to one another. As such, I think a sale to an arms length third party (such as TuneIn or Verizon) is unlikely. Nonetheless, it is interesting to ponder how the streaming platform might be valued on a standalone basis.
My thoughts:
- iHM has a decent liquidity position. There is no risk of a cash crunch until note maturities come due. $361 million of cash on hand at 3-31-24 compares favorably to the 3-31-23 balance of $187.9 million and the 3-31-22 balance of $279.7 million.
- The company has access to a $450 million ABL line of credit under which no borrowings are currently outstanding. There are $24.3 million of availability takedowns for letters of credit, leaving just over $425 million in available draw ability.
- There is no risk of any financial maintenance covenant default at this time. All Term Debt and Notes balances are maintenance covenant free. The ABL Facility is only subject to maintenance covenant testing if & when unused availability falls below the greater of (a) $40 million or (b) 10% of the aggregate commitments under the ABL line of credit.
- Between the company's $2.265 billion in term debt maturing May 1, 2026, its $800MM in senior secured 6.375% notes due May 1, 2026, its $750MM in senior secured 5.25% notes due August 15, 2027, its $500MM in senior secured 4.75% notes due January 15, 2028, and its $500MM in senior secured 4.75% notes due January 15, 2028, it effectively has nearly $4.32 billion in senior secured debt outstanding.
- There are presumably cross-default / cross-acceleration provisions, so in the event one tranche of the above debt goes into an Event of Default, *all* of the above instruments can be immediately called, thereby nullifying the maturity date differences.
- The trading range in the 70s for the term debt and senior secured notes is reasonable based on my analysis, as explained below.
- The senior unsecured 8.375% notes of $916MM due May 1, 2027 are largely worthless. It is worth noting, however, that the company did make some sizable discounted buybacks of these notes in both 2022 and 2023.
- About $330 million of notional 8.375% unsecured notes were repurchased for $299 million in 2022, and $204 million of notional 8.375% unsecured notes were repurchased for $147 million in 2023. If I were a senior secured noteholder, I'd be very unhappy with such use of cash, although it does appear these purchases were permitted by the Term Loan Credit Agreement and by the Notes Indenture for the senior secured notes. No such repurchases occurred in Q1 of 2024, to my knowledge.
- Given risk of future unlevered cash flow slippage, my business valuation would probably be near or just above $4.0 billion, equivalent to roughly 5.0x last 8-quarter annualized Adjusted EBITDA. (The last 8-quarter annualized measurement technique is designed to apply equal weightings to political and non-political advertising years.)
For Q2 through Q4 of 2024, I am projecting $590MM of unlevered free cash flow, $541.5MM in 2025, $595.0MM in 2026 (election year), $460.3MM in 2027, $505.8MM in 2028 (election year), $391.2MM in 2029, $429.9MM in 2030 (election year) and $332.6MM in 2031.
As a point of comparison, unlevered free cash flow equaled $449.8MM in 2020, $654.1MM in 2021, $790.7MM in 2022, and $637.1MM in 2023. First quarter only results include $83.1MM in Q1-21, $121.6MM in Q1-22, $51.1MM in Q1-23 and $82.0MM in Q1-24. Generally speaking, odd numbered years should be compared to other odd numbered years and even numbered years should be compared to other even numbered years due to political ad spend influence.
Adjusted EBITDA, for those interested in that measure, includes results of $539MM in 2020, $811MM in 2021, $950MM in 2022, and $697MM in 2023. First quarter only results include $102MM in Q1-21, $145MM in Q1-22, $94MM in Q1-23 and $105MM in Q1-24. Note that the Q1-24 result is considerably below the Q1-22 result (the most recent preceding even numbered year).
Question: What might a pro forma debt stack look like?
I will focus on funded debt since I presume the Company has no intention of drawing down its ABL Facility.
As noted earlier, the company has nearly $4.32 billion in senior secured debt obligations and $916MM in unsecured debt obligations outstanding.
I believe a new "Term Loan B" (an industry term for an amortization-free or amortization-light term loan with little or no financial maintenance covenants), if sized properly to future projected cash flows, would probably price near 8.50%. Based on that pricing, and solving for 50% theoretical debt clearance (using cash flow after interest expense) by the year 2031, a maximum loan commitment of $3.32 billion could be supported. That equates to a multiple of 76.9% of the current senior secured debt stack. So, this certainly falls within the realm of recent trading levels of the current senior secured debt instruments.
Question: What would the holders of the 8.375% unsecured notes receive in a restructure?
Just like I said with Audacy's pre-reorganization unsecured debt, this paper - at best - has "nuisance value" and little else. I would expect holders of this paper to receive little to zero consideration in a reorganization scenario. Senior secured debt holders are unlikely to graciously extend any monetary "tip" to them for playing nice in the sandbox given the large buybacks of unsecured debt that already happened in 2022 & 2023.
Question: Does the publicly traded common stock have any real value?
Remember that claims of senior secured debt holders come first, unsecured debt holders come second, preferred equity holders come third, and common equity holders come dead last under U.S. Bankruptcy law.
The currently issued common shares are worthless, and anyone taking a long position in iHM stock right now is making a very poor decision, in my opinion.
Question: When might a reorganization occur?
The 2024 annual audited financial statements will be able to be issued at least one year prior to the earliest debt maturity in May 2026, so I would not expect any restructuring proposal to be put forth - or for a bankruptcy filing to occur - sooner than summer 2025.
In Audacy's case, various debt payment dates received a number of short-term extensions before their BK filing ultimately occurred. That was an unusual occurrence but is one that cannot be ruled out here.
Question: Is the company at risk of going into Chapter 11? Didn't they just reorganize in Chapter 11 in 2019?
Given the several different debt tranches involved, with instruments ranging from an ABL facility, to senior secured term debt, to senior secured notes, to unsecured notes, I think ability to institute a debt reorganization on an out-of-court basis is low.
The company, its stakeholders, and their respective advisors most likely will use best efforts to mutually agree to the major tenets of a Plan of Reorganization before any actual BK filing is made by iHM. Any such BK filing would likely occur in second half of 2025 or first half of 2026.
While the 2019 Plan of Reorganization, which took effect May 1, 2019, did wipe a lot of incumbent debt off the company's balance sheet (a $16 billion debt load was reduced to between $5 billion and $6 billion), the financial projections model on which the new debt structure was based contained future earnings assumptions that proved to be substantially incorrect, as actual earnings performance has consistently fallen short of that thesis. The advertising fallout from COVID and evolving media consumption habits have worked against companies such as iHeartMedia, which heavily rely on "linear" broadcasting for a large portion of revenue.
I do not anticipate as high a percentage of debt being wiped out as part of the next reorganization as the prior one. I guestimate the company's total debt load will need to be reduced by nearly 40 percent as compared to current levels. Today, the company has $4.3 billion in senior secured debt and $0.9 billion in unsecured debt. I believe a new plan of reorganization would leave the company with $3.3 billion in senior secured debt and no unsecured debt.
Question: Might the company look to sell assets?
This is tough to answer, because financial statements are broken down into only three broad reportable segments (I think it's three, could be four), and the company owns $6.76 billion in total assets as of 3-31-2024 if we assume their book carry values are valid. (I personally think the company is valuing its Intangible assets at excessively high amounts and that further large Impairment charges will ultimately need to be taken.)
There are probably some assets that are contributing little to no cash flow that likely could be monetized at an attractive multiple, but such "one off" transactions are probably not going to raise enough money to move the proverbial needle in any sort of transformational way.
The company appears to view the iHeartRadio streaming platform and its linear radio business as integral & complimentary to one another. As such, I think a sale to an arms length third party (such as TuneIn or Verizon) is unlikely. Nonetheless, it is interesting to ponder how the streaming platform might be valued on a standalone basis.
Last edited:
Which explains the current trading price. The stockholders know what they own, they know it's worthless, and it is simply a tool that gives them leverage in decision-making. Global Media doesn't own this stock for growth, because they know it won't grow. My view is that looking at iHM stock price is a waste of time. The stock is used as compensation for senior management, that they quickly sell.
One more Q&A item to add:
Question: How might the equity in a reconstituted iHM be allocated?
Depends on the enterprise valuation. My base case EV is $4.0 billion. Because holders of $4.32 billion in senior secured debt under my scenario would be asked to "equitize" about $1.0 billion of their debt, they would be entitled to receive materially all of the equity (i.e. 100% of shares) in the reorganized company. Under this scenario, unsecured noteholders would receive very little to zero equity, and existing equity holders would be wiped out.
My upside case EV is $5.6 billion, which suggests an opening equity value of ~$2.3 billion. Under that scenario, prepetition senior secured debt holders might receive 43% of shares in a reorganized iHM, prepetition unsecured debt holders might receive 40%, and prepetition equity holders might receive 17%.
I think the actual allocations are much more likely to resemble my base case than my upside case.
Question: How might the equity in a reconstituted iHM be allocated?
Depends on the enterprise valuation. My base case EV is $4.0 billion. Because holders of $4.32 billion in senior secured debt under my scenario would be asked to "equitize" about $1.0 billion of their debt, they would be entitled to receive materially all of the equity (i.e. 100% of shares) in the reorganized company. Under this scenario, unsecured noteholders would receive very little to zero equity, and existing equity holders would be wiped out.
My upside case EV is $5.6 billion, which suggests an opening equity value of ~$2.3 billion. Under that scenario, prepetition senior secured debt holders might receive 43% of shares in a reorganized iHM, prepetition unsecured debt holders might receive 40%, and prepetition equity holders might receive 17%.
I think the actual allocations are much more likely to resemble my base case than my upside case.
Out of curiosity, what percentage of outstanding shares are owned by Global (who I believe is based in the UK)?
If leverage over decision making is something I'd value as a stakeholder, I'd much rather hold a large amount of 1st lien debt.
Share based compensation for senior management often comes with sale restrictions, i.e. shares cannot be sold until the vesting period has concluded.
- Status