In Bankruptcy News

IHeart Media, a multi-platform media conglomerate best known for IHeart Radio, a music streaming service that operates 850 radio stations, has filed Chapter 11. Saying that it has more than $20 billion in debt, IHeart Media announced that it had reached an agreement with its creditors to restructure more that $10 billion of that debt. It says it will have enough cash to make it through Chapter 11.

This appears to be another pre-packaged Chapter 11. A pre-packaged Chapter 11 occurs when the debtor reaches an agreement with all its creditors prior to filing bankruptcy. The filing is then made to formalize all the agreements through the debtor’s plan of reorganization that is approved by the bankruptcy court. In a normal Chapter 11, the debtor files and then attempts to restructure its debts under the protection of the bankruptcy court. Pre-packaged bankruptcies have a higher success rate because the agreement has been reached before filing.

According to the company, its problems stem mainly from huge debt that it took on in 2008 when it acquired a majority stake in Clear Channel Outdoor, a national billboard company. Looking at that year, now a decade in the past, it isn’t hard to imagine that the acquisition was believed to be a great opportunity. And then came the Great Recession.

IHeart Media has faced stiff competition from Spotify and Pandora. Just as IHeart Media is preparing its bankruptcy filing, Spotify is finalizing its $1 billion listing on the New York Stock Exchange.

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