After months of speculations, America’s biggest radio company, iHeartMedia which owns iHeartRadio has filed for Chapter 11 bankruptcy in Texas. Struggling under the weight of $20 billion in debt, on Wednesday the radio titan officially filed for protection and announced the filing on its press page. The agreement will effectively cut the debt in half, valued at more than $10 billion.
Chapter 11 is a type of bankruptcy that involves a revamping of an indebted person’s business undertakings, obligations and resources. Chapter 11 is mostly filed by organizations that expect time to rebuild their obligations, and it gives the indebted person a fresh start, subject to the borrower’s fulfillment of his commitments under the plan of reorganization. As the most complex of all liquidation cases and the most expensive, an organization ought to consider Chapter 11 rearrangement only after watchful examination and investigation of every other option.
The radio titan owes millions in unpaid royalty and licensing fees to a number of music rights owners and distributors. The total debt adds up to a whopping $38.4m that includes some of biggest names from the industry namely Nielsen $20.8 mn, SoundExchange $6.4 mn, Warner Music Group $3.9 mn, Universal Music Group $1.3 mn, Global Music Rights $2 mn, Spotify $2 mn and ASCAP $1.4 mn.
According to the experts, this is the result of the 2008 leveraged buyout that even saw the company rebrand into the multinational, the debt has been crippling the entertainment giant for a decade now. Owning over 850 radio stations across the U.S. as well as streaming music services, iHeartRadio has some of the most popular outlets in top-tier markets.
However, the radio powerhouse believes the cash in hand along with cash generated from ongoing operations, will be adequate to fund and support the business during the Chapter 11 proceedings. Meanwhile, the company claims to continue operating the business in the ordinary course as a leading global multi-platform media, entertainment and data company.