The bankruptcy turnaround effort of the country’s largest chain of radio stations, iHeartMedia Inc., is off to a pricey start, according to court documents that reveal the company has been spending, on average, $7.7 million per month for bankruptcy advice, WSJ Pro Bankruptcy reported. And that’s just a slice of the professional fee costs for iHeart, which filed for chapter 11 bankruptcy protection after nearly a year of negotiations about how to shake out a debt overload. iHeart told a bankruptcy judge in Houston Thrusday that it expects to file a chapter 11 plan soon, starting the process of cementing deals reached before its March 14 bankruptcy filing. In broad outline, iHeart wants to swap out about $10 billion of its $16 billion debt load, exchanging the debt for equity in a reorganized company. By the end of its chapter 11 proceeding, the radio giant will be picking up the tab for advisers to an official committee representing unsecured creditors and for advisers to creditors that have agreed to support its restructuring strategy. It is also paying for advisers to the owners that loaded it with debt, Thomas H. Lee Partners and Bain Capital, according to filings with the Securities and Exchange Commission.
U.S. law for centuries has distinguished between a “fraudulent debtor” and an “honest but unfortunate” one, and refused to allow debts accumulated through fraud to be wiped out in bankruptcy. But what happens when that fraud involves a single asset claim that isn’t in writing? How much weight in relation to a debtor’s finances should that get in bankruptcy, and can that debt still be discharged? These questions have split the circuit courts, and the U.S. Supreme Court will hear arguments on April 17 in Lamar, Archer & Cofrin LLP v. Appling, 16-1215, to try and sort things out, according to a Bloomberg Law analysis. It’s difficult to predict how the high court will rule between now and June in its third bankruptcy case of the 2017 term. But the case has “widespread importance” for potentially millions of chapter 7 debtors because of its potential to deny them a discharge and change the law in many jurisdictions, according to an amicus brief filed on behalf of retired Bankruptcy Judge Eugene Wedoff and a group of law professors. The bankruptcy discharge “goes to the very heart of bankruptcy law,” and is an essential aspect of one’s financial and personal ‘liberty,'” Wedoff and the law professors said. Read more.
For further analysis of Lamar, Archer & Cofrin LLP v. Appling, including analysis by ABI's Bill Rochelle and to read filings in the case, please click here.
