OREANDA-NEWS. Fitch Ratings has assigned a 'CCC/RR4' rating to iHeartCommunications, Inc.'s (iHeart) proposed \$550 million priority guarantee notes (PGNs) due 2023. The Rating Outlook remains Negative. Proceeds are to be used to prepay at par approximately \$532.7 million of the term loan B facility and approximately \$8.8 million of the term loan C asset sale facility and to pay accrued and unpaid interest on those loans and associated offering fees. A complete list of ratings follows at the end of this release.

The new PGN notes are expected to share the same terms as the existing PGN notes. Fitch expects the company to consider increasing the size of the facility depending on market conditions, with any additional proceeds to be used to address 2016 maturities.

Fitch views the transaction favorably as it will reduce iHeart's 2016 maturity wall, which compensates for the expected increase in total interest expense.

KEY RATING DRIVERS
--The ratings reflect iHeart's highly leveraged capital structure. Fitch estimates current total and secured leverage of 11.6x and 7.1x, respectively, as of the LTM ended Dec. 31, 2014. Total leverage exceeds levels at the leveraged buyout, as a weak operating profile has limited EBITDA growth and free cash flow (FCF) generation. EBITDA has not returned to pre-downturn levels.
--The ratings and Negative Outlook reflect the limited tolerance for further erosion of iHeart's operating profile and its precarious liquidity position.
--Fitch recognizes that the company completed a series of capital market transactions which have extended a material amount of its secured maturities to 2019 and beyond, providing much needed financial flexibility.
--Fitch expects iHeart's FCF to be negative over the next two years reflecting the interest burden associated with the company's capital structure and operating profile.
--Remaining 2016 maturities totalling approximately \$583 million elevate the refinancing risk attributable to iHeart's credit profile (assumes proposed issuance is not upsized).

Overall, Fitch's ratings reflect the company's highly leveraged capital structure, tenuous liquidity position with significant scheduled maturities remaining in 2016, and Fitch's expectation that the company's considerable and growing interest burden will hinder near-term FCF generation. In addition, iHeart's operating profile is subject to ongoing technological threats and secular pressures in radio broadcasting along with exposure to cyclical advertising revenue. The ratings are supported by the company's leading position in both the outdoor and radio industries, as well as the positive fundamentals and digital opportunities in the outdoor advertising space.

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:
--iHeart is strongly positioned within a secularly challenged radio sector;
--Fitch does not expect a material amount of improvement of iHeart's credit profile or absolute debt reduction over the next several years, given the expected negative FCF;
--Although the proposed debt issuance will reduce scheduled 2016 maturities, iHeart will still have to contend with approximately \$583 million remaining due in 2016;
--Potential asset sales, including the announced sale of 411 broadcast communication tower sites for up to \$400 million, could support iHeart's liquidity position.

Liquidity and Debt
Fitch regards iHeart's current liquidity as limited, particularly in light of near-term maturities. As of Dec. 31, 2014, iHeart had approximately \$271 million in cash, excluding \$186 million in cash held at Clear Channel Outdoor Holdings (CCOH.) Backup liquidity consists of an undrawn \$535 million asset-based lending (ABL) facility (subject to an undisclosed borrowing base and a total leverage covenant) that matures in December 2017 and is subject to springing maturities. The proposed prepayment of iHeart's term loans will ameliorate the springing lien concern at this time.

Recovery Ratings (RRs)
iHeart's RRs reflect Fitch's expectation that the enterprise value of the company will be maximized in a restructuring scenario (going concern), rather than a liquidation. Fitch employs a 6x distressed enterprise value multiple reflecting the value of the company's radio broadcasting licenses in top U.S. markets. Fitch assumes going-concern EBITDA at \$860 million and that iHeart has maximized the debt-funded dividends from CCOH and used the proceeds to repay bank debt. In addition, Fitch assumes that iHeart would receive 90% of the value of a sale of CCOH after the CCOH creditors had been repaid. Fitch estimates the adjusted distressed enterprise valuation in restructuring to be approximately \$7 billion.

The 'CCC/RR4' rating for the bank debt and secured notes reflect Fitch's estimate for a recovery range of 31%-50%. Fitch expects no recovery for the senior unsecured legacy notes, the new 10% senior notes, and senior guarantee notes due to their position below the secured debt in the capital structure, and they are assigned 'RR6'. However, Fitch rates the senior guaranteed notes 'CC' given the subordinated guarantee.

CCOH's RRs also reflect Fitch's expectation that enterprise value would be maximized as a going concern. Fitch stresses outdoor EBITDA by 15%, and applies a 7x valuation multiple. Fitch estimates the enterprise value would be \$4 billion. This indicates 100% recovery for the unsecured senior notes. However, Fitch notches the debt up only two notches from the IDR given the unsecured nature of the debt. In Fitch's analysis, the subordinated notes recover in the 31% to 50% 'RR4' range, leading to no notching from the IDR.

RATING SENSITIVITIES

Negative: An inability to extend maturities would result in a downgrade. This inability may derive from a prolonged consolidated cash burn, whether driven by cyclical or secular pressures, reducing iHeart's ability to fund debt service and near-term maturities. Also, cyclical or secular pressures on operating results that further weaken credit metrics could result in negative rating pressure. Finally, indications that a distressed debt exchange is probable in the near term would also drive a downgrade.

Positive: The current Rating Outlook is Negative. As a result, Fitch's sensitivities do not currently anticipate a rating upgrade.

As of Dec. 31, 2014, iHeart had approximately \$20.6 billion in consolidated debt. Debt held at iHeart was \$15.6 billion and consisted of:

--\$7.2 billion secured term loans (\$931 million in 2016 and \$6.3 billion in 2019);
--\$5.3 billion secured PGNs, maturing 2019-2022;
--\$1.7 billion in senior unsecured 12% cash pay / 2% PIK notes maturing in February 2021;
--\$730 million senior unsecured 10% notes due 2018 (net of FinCo holdings of \$120 million);
--\$668 million senior unsecured legacy notes, with maturities of 2016-2027 (net of FinCo holdings of \$57 million.)

Debt held at Clear Channel Worldwide Holdings, Inc. (CCWH) was \$4.9 billion and consisted of:

--\$2.7 billion in senior unsecured 6.5% notes due 2022;
--\$2.2 billion in subordinated 7.625% notes due 2020.

Fitch currently rates iHeart as follows:

iHeartCommunications, Inc.
--Long-term IDR 'CCC';
--Senior secured term loans 'CCC/RR4';
--Senior secured priority guarantee notes 'CCC/RR4';
--Senior unsecured guarantee notes due 2021 'CC/RR6';
--Senior unsecured legacy notes 'C/RR6'.

The Rating Outlook for iHeart is Negative.

Clear Channel Worldwide Holdings, Inc.
--Long-term IDR at 'B';
--Senior unsecured notes at 'BB-/RR2';
--Senior subordinated notes at 'B/RR4'.

The Rating Outlook for Clear Channel Worldwide Holdings, Inc. is Stable.