December 21, 2016 / 8:22 PM / a year ago

Fitch Downgrades iHeart's IDR to 'C'

(The following statement was released by the rating agency) NEW YORK, December 21 (Fitch) Fitch Ratings has downgraded iHeartCommunications, Inc.'s (iHeart) Long-Term Issuer Default Rating (IDR) to 'C' from 'CC', and affirmed all of iHeart's individual issue ratings. Fitch has also affirmed the IDRs for Clear Channel Worldwide Holdings, Inc. (CCWW) and Clear Channel International B.V. (CCIBV) at 'B'. CCWW and CCIBV are indirect, wholly-owned subsidiaries of Clear Channel Outdoor Holdings, Inc. (CCOH), iHeart's 89.9% owned outdoor advertising subsidiary. The Rating Outlook on the outdoor subsidiaries is Stable. A full list of rating actions follows at the end of this release. The downgrade reflects iHeart's recently proposed exchange offer targeting the 10% senior notes due Jan. 15, 2018 ($347 million held by external holders) which Fitch views as a distressed debt exchange (DDE) due to the proposed extension of the maturity. Fitch notes that the exchange offer provides existing holders of the 10% senior notes due 2018 an improved position in the capital structure, as the new notes would be subject to the same terms that govern the indenture for the existing 11.25% senior Priority Guarantee Notes (PGNs). Per Fitch's criteria, we would downgrade the IDR to Restricted Default ('RD') upon the completion of the exchange. The IDR may subsequently be upgraded reflecting the post DDE credit profile. Any upgrade is expected to be limited to one notch, to 'CC'. The rating incorporates Fitch's belief that iHeart's capital structure is unsustainable and that the company could pursue a broader restructuring of its capital structure over the near term. iHeart announced a proposed private offer to exchange the 10% senior unsecured notes due 2018 for new 11.25% PGNs due 2021 on Dec. 20. The new notes will be issued under the indenture governing the existing 11.25% PGNs and will have the same terms. Holders of the 10% senior unsecured notes due 2018 who participate on or before the Early Tender Date (Jan. 4, 2017) will receive $1,000 in new notes for each $1,000 in principal amount of outstanding notes tendered. Those holders that choose to participate in the exchange offer after the Early Tender Date will receive $970 in new notes per each $1,000 principal amount of outstanding notes tendered. The exchange offer will expire on Jan. 19, 2017. The 11.25% senior secured PGNs due 2021 have a first priority interest in and a mortgage pledge in the stock of iHeart and the intercompany debt of wholly owned domestic subsidiaries of iHeart that are not restricted by the legacy note indenture. The 11.25% PGNs also have a first-priority interest in the non-principal properties and have a perfected second-priority interest in the receivables collateral securing the asset-based lending (ABL) facility. Fitch notes that the exchange if successful would improve near-term liquidity by addressing the first of the principal payments due in 2018. IHeart has $347 million in 10% senior unsecured notes maturing on Jan. 15, 2018 (net of the $503 million held by two subsidiaries of iHeart) that it is targeting with this exchange offer. iHeart also has $175 million of senior unsecured legacy notes maturing on June 15, 2018. iHeart has $330 million outstanding under the ABL facility which matures in December 2017. However, the next hurdle comes in 2019 when the company has $8.3 billion of debt maturing. RATING SENSITIVITIES Positive: Fitch does not currently anticipate a rating upgrade given iHeart's unsustainable capital structure and our expectation that the company is likely to conduct additional debt restructuring over the near term. Negative: Per Fitch's criteria, we would downgrade the IDR to Restricted Default ('RD') upon the completion of the exchange. The IDR would subsequently be upgraded reflecting the post-DDE credit profile, but we do not expect the IDR to be raised above 'CC'. FULL LIST OF RATING ACTIONS Fitch has downgraded the following ratings: iHeartCommunications, Inc. --Long-Term IDR to 'C' from 'CC'. Fitch has affirmed the following ratings: --Senior secured term loans at 'CC/RR4'; --Senior secured priority guarantee notes at 'CC/RR4'; --Senior unsecured guarantee notes due 2021 at 'C/RR6'; --Senior unsecured legacy notes at 'C/RR6'. Clear Channel Worldwide Holdings, Inc. --Long-term IDR at 'B'; --Senior unsecured notes at 'BB-/RR2'; --Senior subordinated notes at 'B-/RR5'. Clear Channel International B.V. --Long-term IDR at 'B'; --Senior unsecured notes at 'BB-/RR2'. Contact: Primary Analyst Patrice Cucinello Director +1-212-908-0866 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Secondary Analyst Jack Kranefuss Senior Director +1-212-908-0791 Committee Chairperson David Peterson Senior Director +1-312-368-3177 Media Relations: Elizabeth Fogerty, New York, Tel: +1 (212) 908 0526, Email: Date of Relevant Rating Committee: Dec. 21, 2016. Additional information is available on Summary of Financial Statement Adjustments - Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below: --Historical and projected EBITDA(R) is adjusted to add back non-cash stock-based compensation; --EBITDA(R) metrics are unadjusted for dividends received from Associates/paid to Minorities. 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