Radio giant iHeartMedia’s latest debt maneuver is fanning the flames of a dispute with activist investor Mario Gabelli. iHeart, led by Chief Executive Bob Pittman, owns 90 percent of publicly traded Clear Channel Outdoor Holdings, the nation’s largest billboard company. Gabelli’s Gamco Asset Management owns 10 percent of the publicly traded shares.
Gamco claims struggling iHeart, owned by private equity firms THL Partners and Bain Capital, is taking advantage of its billboard unit. Among other things, he has questioned why Clear Channel would fund a dividend that benefited iHeart — its biggest shareholder — rather than paying down its own debt. Gamco has sued Clear Channel in Delaware court, accusing the board of failing to act in the best interests of shareholders.
iHeart’s latest debt antics won’t do much to dispel those concerns. On Friday, the company confirmed that it used the $222 million in dividends it collected from Clear Channel to buy back some of its junior debt that is trading at a steep discount to its $383 million face value. The nation’s largest radio operator, which owns station WWPR 105.
1 and classic rock Q104. 3 in New York along with 859 other stations, because of the interest it pays on its massive $21 billion debtload. A spokesman for Gamco declined to comment on iHeart’s debt buyback.
But one iHeart creditor believes the company — which now owns roughly $900 million of its own junior debt — plans to forgive those loans in exchange for preferred iHeart shares. That would lower its interest payments and help the company restructure the rest of its debt. iHeart declined comment.