iHeart Media inching closer to bankruptcy

iHeart Media inching closer to bankruptcy

The leveraged buyout of the nation’s biggest radio broadcaster, iHeart Media, is a perfect example of the risks incurred when banks are allowed to put high multiples of leverage on a company.

iHeart creditors Sunday night were working out the final details of a bankruptcy that is expected in days.

Private equity firms Bain Capital and Thomas H. Lee Partners in 2008 bought iHeart (formerly Clear Channel) and financed the deal by having the lenders borrow money equal to roughly 9 times the company’s pre-tax cash flow.

That is well above the 6 times leverage limits President Obama placed on LBOs in 2013. President Trump’s regulator last week said he will remove those lower debt limits.

iHeart, with 855 radio stations including New York’s Z100 and 103.5 KTU, is profitable when not factoring in its interest payments, and in fact will not need debtor financing when filing for bankruptcy, sources said.

The company had a net loss of roughly $300 million in 2016 after making $1.8 billion in debt payments — indicating a slightly lower level of debt may have kept the company planning its growth instead of Chapter 11.

Debt also has been a problem for iHeart because it made it difficult for it to invest in new technologies, unlike upstart Spotify.

“It’s hard to be innovative when you have high leverage,” a source involved in the 2008 iHeart buyout told The Post.

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