A key shareholder in one of iHeartMedia’s subsidiaries has lost a lawsuit filed in May over revenue shifts from Clear Channel Outdoor Holdings to iHeart to repay company debt.
Gamco Asset Management, founded by investor Mario Gabelli, filed suit in Delaware Chancery Court alleging that an agreement routing daily Clear Channel Outdoor revenue to iHeart leaves it with a “virtually uncollectible receivable” from its parent company of $640 million.
The court disagreed, and ruled Nov. 23 in a 54-page opinion that iHeart did not violate its legal duty to shareholders by engaging in such actions, Law360 reports.
Gamco owns nearly 10% of the stock in Clear Channel Outdoor Holdings not held by iHeartMedia.
Gamco attorney Andrew Entwisle expressed disappointment in the ruling from Delaware Chancery Court Judge Joseph Slights, and told Bloomberg he and his client are evaluating next steps. However, Slights said the suit was essentially derivative of a 2013 settlement that ended a Chancery suit filed by Clear Channel investors in 2012. Thus, Gamco has no basis for the suit, he ruled.
iHeart, which considered the allegations in the suit to be baseless and without merit, was pleased with the ruling.
Interestingly, Gamco backed iHeart in a Texas case decided in May, in which some senior lenders said a stock move was not allowed and violated iHeart’s debt covenants. That court ruled the stock move was allowed.
Additional reporting by Leslie Stimson
RBR + TVBR RELATED READ: Who is Mario Gabelli?