Feb 1 (Reuters) - iHeartMedia Inc said on Thursday it had skipped a $106 million interest payment, the first time it has done so, as the largest U.S. radio station owner continues to negotiate with its creditors in search of relief from its $20 billion debt burden.
Skipping the payment kicks off a 30-day grace period, giving the owner of radio stations including Z100 and 106.7 Lite FM more time to restructure its debt load and avoid bankruptcy. iHeart has been negotiating with creditors for at least two years.
If iHeart does not reach a deal with creditors when the 30 days are up, and still does not make the payment, the creditors can call their debt due immediately, potentially pushing the company into bankruptcy.
Another complication for iHeart is that the payment due on Thursday was for debt tied to a junior, subordinated part of iHeart’s capital structure. Had iHeart made that payment, it may have upset debt investors who are more senior in the company’s capital structure and have a greater claim on the company’s assets.
The latest public proposal by creditors for a debt restructuring, released late last year, called for the senior creditors to take the bulk of the equity in a recapitalized iHeart. The existing owners, buyout firms Bain Capital LLC and Thomas H. Lee Partners LP, would keep small stakes in the company.
The radio station owner tried to trim its debt load by up to $4.3 billion a year ago, according to an estimate by credit ratings agency Fitch Ratings, by convincing its lenders and bond investors to exchange some of their debt holdings. But the company has not received enough support to finalize these arrangements. (Reporting by Jessica DiNapoli in New York; Editing by Susan Thomas)