iHeartMedia Inc has hired Moelis & Co as a financial adviser, the most significant step yet by the largest owner of U.S. radio stations to deal with its $21 billion debt pile, according to people familiar with the matter.
The move comes as iHeartMedia, one of the world's largest leveraged buyouts when it was taken private by buyout firms for $26.7 billion in 2008, struggles to compete for listeners amid digital offerings from competitors such as Apple Inc and Pandora Media Inc.
iHeartMedia has asked Moelis to review offers made by a minority of the company's senior creditors that could potentially make the terms of some of its debt more attractive, the people said this week.
Were iHeartMedia to accept one of the offers, it could reduce the value of its debt and the interest it pays on it, though it could also end up treating its junior creditors less favorably, the people noted.
The sources asked not to be identified because the deliberations are confidential. iHeartMedia, which is also the majority owner of U.S. billboard operator Clear Channel Outdoor Holdings Inc, and Moelis declined to comment.
Clear Channel Outdoor shares dropped 3.8 percent to $4.28.
iHeartMedia has been locked in a battle with its senior creditors after it moved Clear Channel Outdoor stock to another subsidiary, Broader Media LLC. This could help the company find other financing opportunities, Moody's Investors Service Inc said in a research note in December.
Some creditors are resisting the stock move. On Monday, iHeartMedia received a default notice from holders of its priority guarantee notes who argue that the stock move was a default. Those holders could call all their debt due in 60 days, and trigger defaults on the company's other debt.
Before receiving the notice, iHeartMedia, based in San Antonio, Texas, filed a lawsuit in State District Court in Bexar County, Texas, asking for a ruling stating that the company is not in default or in violation of credit agreements.
The company, which is controlled by private equity firms Bain Capital Partners LLC and Thomas H. Lee Partners LP, is asking for a temporary restraining order that would prevent the holders from declaring their debt due and payable immediately.
Political ad spending for the U.S. presidential election is expected to help iHeartMedia this year. However, while iHeartMedia has no issue meeting its near-term liabilities, it remains under pressure to reduce its burdensome debt load.
As of the end of December, iHeartMedia owned 861 domestic radio stations serving more than 150 U.S. markets, including 44 of the top 50 markets.
(This version of the story corrects 9th paragraph to show iHeartMedia filed lawsuit before receiving notice from note holders, not after)
(Reporting by Jessica DiNapoli and Greg Roumeliotis in New York; editing by Chizu Nomiyama and Dan Grebler)