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Fitch: TMT Bankruptcy Case Studies Highlight iHeart's Decline
March 27, 2017 / 1:10 PM / 9 months ago

Fitch: TMT Bankruptcy Case Studies Highlight iHeart's Decline

(The following statement was released by the rating agency) Link to Fitch Ratings' Report: Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries (Fitch Case Studies — 13th Edition) here NEW YORK, March 27 (Fitch) Disruptive technologies that provide new platforms for content consumption are at the root of many bankruptcies in the telecom, media and technology (TMT) sectors, according to Fitch Ratings' Telecom, Media and Technology Bankruptcy Case Studies report. The resulting change in consumption patterns and preferences have pressured enterprise values used in TMT reorganization plans, leaving some unsecured creditors with low recoveries. Fitch's sample of TMT reorganizations had an average multiple of 5.5x, lower than the 6.1x multiple across all corporate sectors. On average, first-lien TMT issues fared well in terms of recovery rates, with average recoveries of 82%. Sixty percent of first-liens in Fitch's case studies recovered more than 91%, equivalent to Fitch's strongest recovery rating (RR1). Junior recoveries were more variable, with median recoveries tallying 37% for second-lien instruments and 23% for unsecured note issues. "Broadcasting and Media bankruptcies in particular tend to be cyclical, coming in recessionary waves that result in cuts in ad spending and consumer discretionary spending," says Sharon Bonelli, Senior Director, Leveraged Finance. "The combination of over-leverage and challenging business conditions often result in untenable capital structures. Others were hurt by long-term secular declines or idiosyncratic problems". Looking forward, these trends shine a spotlight on iHeart Communications, the radio station owner-operator currently caught between an unsustainable capital structure and an industry in long-term secular decline. "iHeart Communications remains the elephant in the room in an industry that otherwise has few near-term default candidates," says Patrice Cucinello, Director, U.S. Corporates. iHeart completed one, relatively small, distressed debt exchange in February and is currently in the market with a more comprehensive global restructuring effort that targets multiple issues. Fitch views the proposed exchange offers as equivalent to out-of-court defaults. iHeart's absolute debt reduction and the resulting reduced cash interest costs, improved free cash flow and extended maturity profile from the proposed exchange offers are reliant on term loan and noteholder participation and can result in a number of varying outcomes. A reduced level of participation could limit improvement to the credit profile following the exchange. Beyond iHeart, Fitch categorizes seven other TMT companies with outstanding high yield bonds or loans as near-term default candidates. They include Cumulus Media, Getty Images, Spanish Broadcasting Systems, Checkout Holdings Corp., Emmis Communications, Answers Corp., and Triple Point Technology. The full report, 'Telecom, Media and Technology Bankruptcy Enterprise Values and Creditor Recoveries,' is available at It analyzes enterprise valuations and creditor recoveries for 56 TMT bankruptcies. Contact: Sharon Bonelli Senior Director Leveraged Finance +1-212-908-0581 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Patrice Cucinello Director Broadcasting and Media +1-212-908-0866 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: Additional information is available on ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. 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