February 8, 2017 / 7:19 PM / a year ago

Fitch Downgrades iHeart's IDR to 'RD' and Upgrades IDR to 'CC' on Closing of Exchange Offer

(The following statement was released by the rating agency) NEW YORK, February 08 (Fitch) Fitch Ratings has downgraded iHeartCommunications, Inc.'s (iHeart) Long-Term Issuer Default Rating (IDR) to 'RD' from 'C' following the closing of the distressed debt exchange (DDE) offer to holders of the 10% senior notes due 2018. Subsequently, Fitch upgraded iHeart's Long-Term IDR to 'CC' from 'RD', which Fitch believes is reflective of the post-DDE credit profile. Fitch has affirmed all of iHeart's individual issue ratings and 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 upgrade to 'CC' reflects Fitch's belief that while the distressed exchange modestly improved liquidity by reducing the next maturity hurdle coming due in January 2018 by $235 million, the company's capital structure remains unsustainable and iHeart could pursue a broader restructuring of its capital structure over the near-term. Fitch notes that pro forma for the recent exchange offer, iHeart has $287 million in notes maturing in 2018 ($112 million of remaining 10% senior unsecured notes due Jan. 15, 2018, net of the $262 million held by subsidiaries of iHeart, and $175 million of 6.875% senior unsecured notes maturing June 15, 2018). Notably, the company's asset-based lending (ABL) facility, which had $330 million outstanding, matures in December 2017 and iHeart faces an $8.3 billion maturity wall in 2019. On February 6, iHeart announced the expiration of its exchange offer targeting the 10% senior unsecured notes due 2018. Of the $347 million held by public holders, roughly $235 million (68% of aggregate principal held by public holders) was tendered in the exchange. The $503 million in notes tendered by the two iHeart subsidiaries will be prorated so iHeart remains in compliance with the senior debt capacity under its indentures. iHeart expects to issue roughly $476 million of new 11.25% priority guarantee notes (PGNs) including $235 million to public holders and $241 million to the iHeart subsidiaries. The new notes will be issued under the indenture governing the existing 11.25% PGNs and will have the same terms. The 11.25% senior secured PGNs due 2021 have a first-priority interest 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 ABL facility. RATING SENSITIVITIES Positive: Fitch does not currently anticipate a further 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: Given the company's unsustainable capital structure, Fitch believes there is limited room at the current rating level for deterioration in the company's operating performance or liquidity profile. An inability to repay or extend maturities would result in a downgrade. Lastly, indications that a DDE is probable in the near term would also drive a downgrade. FULL LIST OF RATING ACTIONS Fitch has downgraded the following: iHeartCommunications, Inc. --Long-Term IDR to 'RD' from 'C'. Fitch has upgraded the following: iHeartCommunications, Inc. --Long-Term IDR to 'CC' from 'RD'. Fitch has affirmed the following: iHeartCommunications, Inc. --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 Sharon Bonelli Senior Director +1-212-908-0581 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: alyssa.castelli@fitchratings.com. Date of Relevant Rating Committee: Feb. 8, 2017 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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