iHeartMedia plan challenged by legacy notes trustee and U.S. Trustee

By Caroline Salls

Pittsburgh, Nov. 29 – iHeartMedia, Inc.’s fifth amended plan of reorganization drew objections Wednesday from the U.S. Trustee overseeing its Chapter 11 case and legacy notes indenture trustee Wilmington Savings Fund, FSB, according to filings with the U.S. Bankruptcy Court for the Southern District of Texas.

The indenture trustee said in its objection that the plan “caps a multi-year effort by the sponsors to benefit themselves at the expense of their various creditor constituencies.”

Wilmington said the sponsors’ board representatives caused the iHeart debtors to negotiate and finalize the restructuring support agreement on which the plan is based.

“At its core, the RSA plan enshrines three forms of valuable consideration provided to its sponsor architects – a direct award of consideration on account of their equity interests, pari treatment on their debt claims and free third-party releases,” the indenture trustee said.

“To reverse engineer these benefits to old equity, however, the RSA plan has been forced to deviate from the requirements of the Bankruptcy Code.”

Although it has made multiple settlement offers, the trustee said the plan proponents have refused to approve a single offer of comprehensive settlement and “seem to have cynically adopted a ‘litigate first, negotiate later’ approach to engagement with nearly half a billion dollars of unsecured funded debt.”

Meanwhile, acting Region 7 U.S. trustee Henry G. Hobbs said in his objection that the plan’s release provisions render it unconfirmable.

Specifically, Hobbs said the releases “are not supported by consideration, agreement or specific action by or for the related parties.”

In addition, he said the plan improperly provides broad third-party releases, exculpations and injunctions.

The plan confirmation hearing is scheduled for Dec. 11.

iHeartMedia is a media and entertainment company based in San Antonio. The company filed bankruptcy on March 15, 2018 under Chapter 11 case number 18-31274.

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