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The iHeartMedia saga continued this week with shifting allegiances, creditor group formation and evolving game theory.

The big move came when Pimco — one of the radio broadcast company’s largest lenders and shareholders — decamped from a group of lenders that held the majority of the company’s term loans and possibly its unsecured bonds, but not its 2026 secured notes.

Putting aside which lenders have which allegiances to which law firms, for a partial answer to the question as to why that group was untenable, one only has to look at what those three securities have in common.

Namely, the term loans, 2026 secured bonds and the 2027 unsecured bonds were all issued upon the company’s emergence from Chapter 11 in May 2019 and they all contained one key provision: The J. Crew Blocker.

This provision was designed to prevent the transfer of certain material assets like intellectual property (such as the eponymous J. Crew brand) to unrestricted subsidiaries, i.e., prevent asset stripping and drop downs that are often features of modern-day liability management exercises, LMEs.

The iHeart secured notes due 2027 and 2028 were issued later that year and did not have said provision.

While no “blocker” (the flavors include Serta Blocker, Chewy Blocker, Envision Blocker, etc.), is foolproof at preventing the transaction it is named after, it appears that at the very least it was a factor in how creditor groups shifted and what their expectation is of iHeart’s appetite to do an LME.

Specifically, creditors thought that iHeart did not want to get creative to work around any single bond or loan issuance with a J. Crew Blocker where they didn’t have the supermajority of that debt accounted for (with which they could strip the covenant and do it anyway).

There are some differences between the bonds and the loans that parties thought might be taken advantage of, but ultimately that was ruled out — for now. It’s worth looking at that language to potentially get an idea of what the company might do once it does encounter a group with the requisite majorities.

The J. Crew Blocker in iHeart’s credit agreement states:

“Notwithstanding the foregoing, no Broadcast Licenses, Broadcast Stations or material intellectual property or other material property or asset necessary at such time to the operation of the business of the Loan Parties (or Equity Interests in any Loan Party that owns any such Broadcast Licenses, Broadcast Stations or other property or asset) that are, in each of the foregoing cases, owned by a Loan Party, may be contributed as an Investment or otherwise, whether directly or indirectly or by one or more transactions, by any Loan Party to any Person that is not a Loan Party.”

While the 2026 secured notes indenture and the 2027 unsecured notes indenture both say:

“Notwithstanding the foregoing, no Broadcast Licenses, Broadcast Stations or material intellectual property or other material property or asset necessary at such time to the operation of the business of the Parent Guarantor and its Restricted Subsidiaries that are, in each of the foregoing cases, owned by a Guarantor, may be contributed as an Investment or otherwise, whether directly or indirectly or by one or more transactions, by any Guarantor to any Person that is not a Guarantor.”

Could it be that iHeart is looking to put its broadcast licenses and IP into an unsub and then do a deal? Or is it going to be a broader package to address the 2027 and 2028 secureds as well…or both? Given it’s a public company looking to do an out-of-court LME and management still has scars from the fees they burned through in its in-court restructuring (at least $140m just paid by the estate), it may be that iHeart is looking to avoid anything that could wind up in court one way or another.

If you have any recent moves to announce, please send to one of our team’s emails below to include in our People Moves section.

Paul Hastings this week announced another major recruitment of a team of lawyers across the restructuring and private credit space, this time from King & Spalding. The K&S team joining Paul Hastings includes Jennifer Daly, who was co-head of the global finance and restructuring practice and previously headed the private credit and special situations practice, along with Roger Schwartz, Matthew Warren, Christopher Boies, Zachary Cochran, Peter Montoni, Geoffrey King, Lindsey Henrikson, Robert Nussbaum, James Gallagher, and Jack Fitzpatrick. In 2022, Paul Hastings grabbed a full 43 restructuring lawyers from Stroock & Stroock & Lavan.

Elsewhere, Pallas Partners hired Susana Cao Miranda as a partner and Jack Beevers as an associate in its London office.

iHeart — iHeart lenders organized, de-organized and then organized again, with one group this week circulating a cooperation agreement, which would bind their acts together in potential negotiations with iHeartMedia, according to sources. The move comes after iHeart management said it was evaluating opportunities surrounding its capital structure, spurring creditors to huddle and restructuring advisors to jostle for mandates.

Sonrava Health (fka Western Dental) — The New Mountain-backed dental healthcare company — advised by Ropes & Gray and Greenhill — launched a liability management deal involving new money raised via a drop down of assets and a priority exchange offered at par to the existing term loan. Exchanging lenders will receive step-ups in coupon, while an ad hoc group of lenders represented by Paul Hastings and Lazard will receive a backstop fee.

Wellpath — The HIG-backed prison healthcare company is working with Lazard to explore options ahead of a revolver maturing and a first lien term loan becoming current in October. A group of lenders are said to have tapped Akin Gump and have taken pitches from bankers, with Houlihan Lokey in the pole position.

Hertz — A group of Hertz unsecured creditors have organized with Willkie Farr following news that the car rental company was looking to raise capital following two quarters of poor performance amid a soured bet on electric vehicles.

Distressed Pitch List — We have published the second edition of our Distressed Pitch List. We have added Forward Air, Skillsoft, and Viasat, and removed Petco, Trinseo, and US LBM. To view the full report, click here.

Steward Health — FILO lenders to Steward offered an alternative $25m DIP and opposed certain incentives proposed by the struggling hospital operator to attract third party DIP financing as current junior DIP provider Medical Properties Trust appears unwilling to extend further commitments. Judge Christopher Lopez of the US Bankruptcy Court of the Southern District of Texas approved the proposed incentives, which included a 3% commitment fee and expense reimbursement, over the FILO lenders’ objections.

Enviva — Vinson & Elkins has asked the court to reconsider its decision to deny V&E’s retention application as debtors’ counsel. The reconsideration motion will be heard at a hearing scheduled for 14 June.

Diamond Sports Group — During a status conference on 4 June, the company outlined that it remained at an “impasse” with Comcast and would seek potential alternatives for distribution, as the Regional Sports Network operator’s major league team partners foreshadowed objections to the current go-forward plan. A hearing on plan confirmation is currently scheduled to begin on 29 July.

Thrasio — The Amazon aggregator filed terms for settlement with the UCC. General unsecured creditor recoveries are expected to get a boost, with GUCs to share in proceeds from certain claims and causes of action of the bankruptcy estate to be transferred to an SPV. Objections to the plan (including from the US Trustee) will have to be resolved at or prior to the confirmation hearing on 10 June.

Express — Express has received permission to move forward with its sale process. The sale, backed by a stalking horse bid, is slated to move quickly, with an auction on 12 June and a sale hearing scheduled for 14 June.

Invitae — The Invitae UCC objected this week to the disclosure statement and voting procedures in part alleging no solicitation of consent of unsecured creditors.

Robertshaw — We’re awaiting a verdict from Judge Christopher Lopez after the adversary proceeding trial came to an end last week.

Incora — The long-running adversary trial playing out in Texas bankruptcy court is lurching toward a close, with the last scheduled witness testimony taking place earlier this week.

EchoStar/DISH — DISH is reported to be in talks with holders of its convertible debt for new financing backed by spectrum held at an unrestricted subsidiary. 9fin had earlier reported that a DISH DBS noteholder lawsuit concerning the spectrum had been moved to federal court. Earlier, EchoStar posted dismal Q1 24 results, while still not having stated plans to manage its debt obligations, the most conspicuous of which is $1.98bn in outstanding senior notes due in November.

Xplore — The Canadian rural internet provider announced an agreement to raise new debt and equity financing, with sponsor Stonepeak and certain existing lenders leading the investment and other lenders to get the opportunity to participate on substantially similar terms. Xplore has commenced a proceeding under the Canada Business Corporations Act to implement the deal.  

Careismatic Brands — The confirmation of Careismatic’s Chapter 11 plan was appealed by the UCC. The plan provides for a debt for equity swap for the company’s first priority debt, and the creation of a GUC trust to potentially pursue certain claims and causes of action. The judge had ruled that the GUC trust is responsible to pay any quarterly US Trustee fees for disbursements made after monetizing those assets.

Hornblower — The disclosure statement and Chapter 11 plan of the cruise, ferry and land-based travel company was confirmed. The company had filed for bankruptcy in February, with Strategic Value Partners expected to gain control of the larger reorganized business while existing sponsor Crestview Partners to retain the Australian business.

Fisker — The troubled EV company disclosed that CVI Investments/Heights Capital, holder of its senior secured notes due 2024, called an event of default and accelerated the notes after a forbearance agreement expired on 17 May. Our coverage of Fisker and the dual track process set by Heights Capital can be found here.

ConvergeOne — The debtors’ Chapter 11 plan became effective on 4 June, after it was confirmed on 23 May by Judge Christopher Lopez, who also overruled an objection from certain excluded lenders.

Rubio’s Restaurants — The restaurant chain famous for its fish tacos filed a Chapter 22 before the US Bankruptcy Court for the District of Delaware, intending to conduct a 363 sale of its assets. The first day hearing is scheduled for 1 pm ET on 10 June before Judge Goldblatt. 9fin had earlier reported that Rubio’s was considering a possible Chapter 11 bankruptcy filing in order to sell itself.

Sinclair Broadcast Group — Investment firm Chatham Asset Management sent a letter to Sinclair this week urging the broadcaster to pursue a traditional financing rather than dividing up existing collateral.

Gray Television — The broadcaster closed a $1.75bn bond and loan financing deal, and extend its revolver. It had earlier announced a $250m debt repurchase plan along with Q1 24 earnings that showcased a year-on-year improvement, sending prices of its debt and shares higher.

Other active distressed and restructuring coverage

Alkegen — Formerly known as Unifrax, the specialty materials maker is getting financing proposals from third party investors to help pad its liquidity and address its upcoming debt wall.

Altice France (SFR) — The distressed telco’s Q1 24 results came with a surprise. It has contributed its shares in its valuable FibreCo, XpFibre, and some of its receivables against XpFibre to an unrestricted holding company, setting the structure up for a potential priming transaction. 9fin’s analysis suggests the new HoldCo could have commercial debt capacity between €1.05bn-€1.75bn, which owner Patrick Drahi could use alongside asset sale proceeds to achieve his 4.0x leverage goal.

Altice USA — As part of the heavily indebted Drahi empire that has come into focus after the hardball tactics taken with creditors to Altice France, creditors of the USA business of Altice are said to have organized with Akin Gump and PJT Partners while the company is reportedly working with Moelis.

Anthology — Nearly 100% of the first lien loans of the Veritas-backed ed-tech company are said to have agreed to exchange under a liability management deal that 9fin had reported was launched after negotiations with an ad hoc group of first lien lenders. The deal also extends the company’s revolver to early-2028.

Ardagh Group — Two creditor groups continue to prepare for subsequent debt negotiations with the glass and metal packaging company after an aggressive third-party financing transaction. Meanwhile, Ardagh announced a redemption of its 5.25% SSNs due 2025.

Astound Broadband — A group of lenders started confidential talks with the Stonepeak-backed internet and cable provider. While the company has far-dated debt maturities, it is grappling with a cash flow squeeze.

Bausch Health — Two creditor groups have banded together to implement one of the largest — and most unique — cooperation agreements to date, amid growing concerns over the company’s pursuit of one-off exchanges and the potential spin off of valuable eye care subsidiary Bausch & Lomb.

Belk — Lenders to the department store chain have been speaking with the company about a restructuring that could exchange much of its debt into equity.

Cano Health — Cano Health’s disclosure statement was approved after having to continue the hearing two times to allow for more time to negotiate terms of a settlement with its UCC. The plan, a dual-track plan at petition date, now contemplates a restructuring transaction, after no actionable bids were received for the company’s assets. A hearing on confirmation is scheduled for 28 June.

Carestream Dental — The CD&R and CareCapital Advisors-backed company has been working with Jefferies to address its revolver and term loan maturities this year.

CommScope — The company reported Q1 24 results, with continuing declines across segments and significant cash burn, though the CCS and OWN segments have shown signs of recovery. Management noted that CommScope was continuing to evaluate all alternatives, including using flexibilities in credit documents (9fin analyses here), to address debt maturities. More recently, the company was selected as the winning bidder for Casa Systems’ cable business assets under a Section 363 auction.

Cox Media Group — Certain holders of Cox Media Group’s term loan and bonds organized driven by concerns around the Apollo-backed TV broadcasting and radio company issuing dividends when the business is struggling and facing a high debt burden.

Del Monte Foods — A group of lenders has hired Houlihan Lokey to help kickstart negotiations with the company, which is struggling to gain traction on a capital raise.

Dynata — The struggling market research company filed a prepack in the US Bankruptcy Court for the District of Delaware that would see first lien lenders receive 95% of reorg equity, with a confirmation hearing set for 2 July. The company was also granted all relief requested at its first-day hearing. The first lien and second lien term loan treatments under the plan have caused divergent reactions in the secondary market.

Emergent BioSolutions — Holders of Emergent’s 3.875% SUNs due 2028 stand to receive a high potential recovery amid a stabilization of earnings, per 9fin analysis, as our illustrative waterfall outlines a scenario-based recovery of between 92% and 93% with the bonds quoted near 60 cents.

EyeCare Partners — The vision care network completed its liability management deal involving $275m of new money and a discounted debt exchange that offered better terms to lenders who participated early and were involved in confidential talks with the company.

FreshDirect — The grocery delivery company has hired restructuring advisors and has been reaching out to potential investors for rescue financing. The development marks a rapid downfall for FreshDirect, which enjoyed strong demand during the pandemic and was acquired by Turkish company Getir late last year.

Gol Airlines — Gol’s Abra bondholder group recently disclosed updated members and holders including distressed investors. The bankrupt airline has said it will evaluate all recapitalization or other transactions, including to raise capital while in bankruptcy. In recent days the UCC has objected to the debtors attempts to allow aircraft lessors to sell a participation interest in their unsecured claims, while retaining their voting rights on any potential Chapter 11 plan.

Hearthside Food Solutions — Some par holders have sold their positions in Hearthside’s loan to Apollo Global Management, which is leading the steering committee of an ad hoc group of lenders.

Lionsgate — Bondholders left out of an earlier exchange have reportedly started to explore legal action, after the film and TV media company completed an exchange where its 2029 SUNs indenture was amended to strip certain covenants and events of default.

Medical Properties Trust — The healthcare REIT filed its delayed 10-Q for Q1 24 along with an updated quarterly supplemental, and disclosed additional subsequent write-downs on its investment in PHP Holdings of $140m. It had recently secured a 6.9%, 10-year £631m non-recourse financing secured by certain properties in its UK portfolio.

MRP Solutions — Lenders to Clearlake Capital-backed packaging manufacturer (fka Mold-Rite Packaging) are organizing.

Office Properties Income Trust — The REIT announced two amendments to its exchange offers launched in May. The first set of amendments introduced “priority amounts” of new secured notes each series of unsecured notes (due 2025 to 2031) could exchange into and stipulated that other maturities will be able to participate in any unallocated or “undersubscribed” amounts in reverse-chronological order — effectively demoting the 2025s to the bottom for any unallocated priority amounts. The second set of amendments reduced the priority amount reserved for the 2025s and increased it for the 2027s, but promoted the 2025s to the top of the priority order for undersubscribed priority amounts. The exchange expires on 10 June.

Pluralsight — 9fin reported on how the company is exploring a transaction in which it would move a material IP asset to a non-guarantor subsidiary outside its restricted group — and then raise new debt on the asset.

Red Lobster — Red Lobster commenced its Chapter 11 in the Middle District of Florida. At its first day hearing, the company received interim approval of its first-day motions, but a looming fight over terms contained in its DIP facility was highlighted, with the UST making vigorous objections to the proposed roll-up and foreshadowing issues that a yet-to-be-appointed UCC will potentially find objectionable.

Red River Talc (J&J) — Johnson & Johnson is facing a class action complaint alleging that its prior attempts at using Chapter 11 to resolve its alleged talc liabilities contain multiple fraudulent transfers. 9fin’s summary of the J&J’s third attempt at resolving claims pertaining to its talcum baby powder through Chapter 11 is available here.

Rite Aid — Rite Aid’s confirmation hearing is now scheduled for 27 and 28 June as set by the judge overseeing the case. The company is also involved in a dispute with MedImpact, the company that purchased the Elixir assets from Rite Aid, over the proper calculation of post-closing net working capital purchase price adjustments.

rue21 — The Blue Torch-controlled fashion retailer filed a Chapter 33 before Judge Brendan Shannon of the US Bankruptcy Court for the District of Delaware. The company aims to close all stores, conduct wind-down sales, and market its IP and intangibles for a sale. The docket is available here.

Salem Media — Certain debtholders have banded together with Paul Hastings to negotiate a possible debt restructuring with the conservative Christian media company.

SI Group — The chemical additives company shared preliminary 2023 results, which left some investors questioning the sustainability of its capital structure, even as its business shows signs of recovering.

SIRVA — The moving services company was downgraded by S&P from B- to CCC. The S&P note states that on 25 April, SIRVA’s first and second-lien credit agreements were “modified to pledge more equity from subsidiaries as collateral to lenders, to 100% from 65%, which we view as lenders' concerns over the company's performance and ability to manage its obligations in a difficult operating environment.” This comes after it raised a new money priming loan (per S&P a $84m delayed-draw term loan) in order to bridge the company to a broader debt restructuring.

Sound Inpatient Physicians — The hospital staffing company launched an exchange offer with approximately 90% of its existing lenders on board. Its sponsors, Summit Partners and UnitedHealth have also agreed to inject $49m of equity into the company.

Spirit Airlines — The troubled ultra low-cost airline reported Q1 24 earnings, disappointing but largely in line with guidance published recently, and management painted a bleak picture for Q2 and beyond. Management also announced concrete plans to survive on a standalone basis. Read our three-part series on the stressed ultra low-cost airline and its Loyalty Notes: Part 1, Part 2 and Part 3.

Sunnova Energy — The residential and commercial solar company has hired AlixPartners to help boost liquidity and Moelis to explore restructuring options. Earlier, it has agreed on several funding deals, including a new tax equity agreement with JP Morgan and a lease securitization deal with owners of home security firm Brinks Home, and more recently a DoE-guaranteed loan.

Telesat Canada — The Canadian satellite company posted expected declines in revenue, EBITDA and margins in Q1 24, and reaffirmed guidance for the full year. Backlog and cash generation for the legacy business declined as Telesat continues to lose GEO customers and focuses on Lightspeed. Certain creditors are reported to have hired Evercore and Lincoln International for advice. 9fin earlier provided a comprehensive analysis of the company’s disappointing FY 23 earnings and FY 24 guidance.

2U — The education tech company has started confidential negotiations with creditors on ways to overhaul its debt. Once a high-flying online education startup, 2U is facing an upcoming debt wall and heightened regulatory scrutiny of its revenue-sharing business model.

United Site Services — The portable toilet rental company is set to tap a $115m commitment from sponsor Platinum Equity as it battles weaker earnings amid an inflationary and higher rate environment.

TGI Friday’s — The restaurant chain has engaged an FA to raise roughly $200m of new funding to pay down debt.

VeriFone — Lenders to the payment and commerce solutions company have organized with Gibson Dunn as they prepare for negotiations ahead of the maturity of the company’s $250m revolver and over $2bn of term loans in 2025.

Veritas Technologies — A group of creditors has begun confidential talks with the Carlyle-backed data management firm on ways to address its debt due 2025.

VistaJet — The private jet subscription company released Q4 23 results, with the company’s founder penning a letter announcing legal action against a “group of individuals” that has “disseminated half-truths, false rumors and lies”.

WeWork — WeWork’s bankruptcy came to a close after its plan of reorganization was confirmed at an uncontested hearing. WeWork plans to emerge as a private company sometime in the next month.

WOM — WOM and its ad hoc group of unsecured noteholders’ sparred over discovery issues involving the group’s motion to dismiss or, in the alternative, to appoint a Chapter 11 trustee. The debtors had objected to certain of the group’s discovery requests, but the judge backed the group and ordered the debtors to respond to the requested discovery. A trial on the motion to dismiss and the company’s second day hearing will be held on the 20 and 21 of June.

Workhorse — The electric vehicle company continues to raise capital through the issuance of convertible notes and warrants and employ cost-cutting measures to address cash flow pressures. 9fin had earlier reported that the company is working with Stifel to help raise bridge financing.

WorldStrides — The student trip company’s recently launched exchange offer to Holdco term loan holders at 40 cents on the dollar has failed after the company launched the exchange with no notice or support from existing or third-party lenders.

Zachry Group — The family-owned EPC company filed for Chapter 11 protection in SDTX after facing defaults under its EPC contract for a mega LNG project in Texas, and battling cost issues and supply chain disruptions. The project is owned by Qatar Energy and ExxonMobil, and Zachry has filed an adversary proceeding to pursue multiple claims against the project and its owners. Parties will attempt to mediate the disputes with Judge Christopher Lopez presiding.

Zayo — The telecom company announced that it is carving out two entities, including its European business and its business that manages network needs outside of the North American and European networks. After the separation, Zayo Europe will appoint a new board of directors.

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