The sale of 411 towers to Vertical Bridge will not affect Fitch Ratings’ assessment of iHeartMedia’s overall financial position, and perhaps that’s unfortunate in this case.
The sale will bring in $400M and will decrease some overhead, but will also increase certain other expenses.
iHeart is under severe leverage strain, at 11.2x based on $21.2B in consolidated debt – the tower deal will provide near-term liquidity but won’t make a big dent in the overall debt profile.
The company’s outlook remains negative.
The $400 million payday brings along the additional benefit of an annual $3.8M reduction in operating costs. However, it also has two annual negatives, the loss of $22.7M in rent received and the addition of $11.6M in rental expense going out.
The company’s next major financial hurdle is a 2016 maturity of $1.2B, which Fitch believes will be refinanced.
The debt puts the company at risk for a general economic downturn. Fitch commented, “The ratings and Negative Rating Outlook reflect the limited room within the credit profile to endure any material deterioration in operations. An inability by iHeart to extend maturities would result in a rating downgrade.”
