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On business: Debt-laden South Carolina radio giant seeks to lighten the load

Listeners probably didn’t pick up on it, but a major radio station owner in South Carolina made an important programming note last week: In an off-air move, iHeartMedia Inc. filed for bankruptcy protection as it seeks to cure the pounding financial hangover it's been living with for the better part of a decade.

The company, formerly known as Clear Channel Communications, is a huge broadcaster across the Palmetto State, where it operates about two dozen AM and FM signals in Charleston, Columbia, Florence, Greenville and Myrtle Beach.

All of those stations and more than 800 others around the country are included in the bankruptcy petition that iHeart filed late Wednesday in Texas. The San Antonio-based company’s big billboard business isn't part of the restructuring.

For the moment, the beat goes on at iHeart for its estimated 265 million monthly listeners and 17,000 employees. The company also has assured vendors it has the means to pay them during the bankruptcy process. 

“They’re not shutting down. They’re going to pay their bills,” Debtwire analyst Seth Crystall told Variety last week. “If you were listening to iHeartRadio, or going to iHeart concerts, you will not even know the difference.”

Like many other old-line media outlets, the so-called terrestrial radio business has suffered from a familiar one-two punch in the disruptive digital era. New rivals, such as the streaming service Spotify and satellite rival Sirius XM, are offering consumers new choices while advertisers are devoting more of their marketing dollars to online outlets like Facebook. 

On top of those formidable challenges, iHeart was overextended — in a big way. And it isn't alone. Atlanta-based Cumulus Media, the second-largest U.S. radio conglomerate, with 20 stations in South Carolina, also is seeking relief from its financial woes. It took the bankruptcy plunge late last year. 

The troubles for iHeart go back to its $17.5 billion leveraged buyout in 2008, a deal that saddled the broadcasting giant with crushing financial obligations. Its debt totaled about $20 billion as of last week.

The company, which is owned by Thomas H. Lee Partners and Bain Capital, has been negotiating with lenders for at least a year to restructure the debt terms. Last month, it missed a $106 million payment, triggering a default that forced it into bankruptcy protection.

Wednesday's filing was a last-resort effort to lighten the load and enable the company to spend more of its considerable cash flow on improving its business rather than on paying down interest. Most creditors appear to be on board with the prepackaged reorganization plan, which calls for them to swap about $10 billion in debt for almost 90 percent of iHeart's equity.

“The agreement we announced today is a significant accomplishment, as it allows us to definitively address the more than $20 billion in debt that has burdened our capital structure,” CEO Bob Pittman said in a written statement. “Achieving a capital structure that finally matches our impressive operating business will further enhance iHeartMedia’s position as America’s #1 audio company.”

What Pittman didn't say is that the bankruptcy process is completely unpredictable, leaving financially strapped businesses exposed and vulnerable.

One likely suitor for iHeart is Liberty Media Corp. The Englewood, Colo.-based company, which owns the Atlanta Braves and is controlled by billionaire John Malone, has amassed major stakes in Sirius XM and the online radio service Pandora.

Liberty Media recently offered what was viewed as a low-ball offer of $1.1 billion for 40 percent of iHeart, but it came too late to avert the bankruptcy filing. Malone & Co. could well tune back in to this program. 

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Contact John McDermott at 843-937-5572 or follow him on Twitter at @byjohnmcdermott