Pimco Starts iHeart Creditor Group as Fresh Brawl Shapes Up

(Bloomberg) -- Pacific Investment Management Co. is laying the groundwork for a potential brawl over the future of iHeartMedia Inc.

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The investment firm is in the process of creating a breakaway group and hired Davis Polk & Wardwell, a New York law firm with a history of leading sharp-elbowed creditor battles, according to people familiar with the matter, who asked not to be identified because the information isn’t public.

The group is also getting debt advice from Perella Weinberg Partners, some of the people said.

IHeart, which emerged from Chapter 11 five years ago, is facing a potential restructuring as radio advertising dries up and younger audiences tune in elsewhere. Its debt trades in distressed territory and its shares have plunged almost 60% this year.

Some of the company’s creditors, including Pimco, were previously working with financial adviser Evercore and law firm Milbank. Some holders are sticking with Evercore and have turned to Gibson Dunn & Crutcher for help securing an agreement that pushes out the maturities on the debt, according to some of the people. The advisers are drawing up a cooperation pact that would require them to act together, they added.

Creditor fights have proliferated in recent years as investors aggressively jockey for an edge in complicated restructuring deals. In the past, they’ve turned to controversial refinancing agreements that allow lenders to jump to the front of the repayment line. Pimco played a key role in a creditor-on-creditor clash that involved struggling aerospace supplier Incora that’s now at the center of an ongoing court battle.

Meanwhile, iHeart is receiving debt advice from PJT Partners, which has been reaching out to large debtholders, the people added.

Representatives with Pimco, iHeart, Perella and PJT declined to comment. Representatives for Davis Polk, Evercore, Milbank and Gibson Dunn did not immediately respond to a request for comment.

IHeart had more than $5.2 billion of debt as of March 31 spread across various secured and unsecured facilities, according to regulatory filings. A roughly $1.8 billion term loan due in 2026 trades around 78.5 cents on the dollar, data compiled by Bloomberg show. An $800 million 6.375% note maturing in 2026 traded at about 79, down from around 86.5 cents on May 6, according to pricing source Trace.

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