As pointed to be Tom Taylor’s news letter:
This is proposed pre-packaged bankruptcy. In a Chapter 11 bankruptcy, normally there is an entity called the “Debtor in possession”. The DIP agrees to put up the money to keep the company running while the bankruptcy process is negotiated.
In return for putting up their short term loans and priority debt, for $5.55 billion, that group will get all of Clear Channel’s assets, including the outdoor advertising business and transit advertising in Europe. They will get about 95% of the “New” Clear Channel stock.
The junior debt holders will get $200 million in debt, 5% of the new stock, and warrants that would be valuable if/when the new iHeart stock takes off.
The reality is that iHeart is cash flow positive if the interest on the debt is not paid. The DIP is mainly a formality to manage the process.
I am not a bankruptcy attorney, so do not take any of the above as advice. It is not certain this will be the actual plan until it goes to a judge, but the SEC being informed suggests this will really happen.