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14 December 2016 by lberuti

CCU (iHeartCommunications, Inc) said they are not going to repay the $57.1mln of their notes maturing tomorrow that they have bought in the market earlier this year. They will repay the other $192.9mln outstanding though. The December 2016 notes are part of the “legacy notes” (together with bonds maturing in 2017 and 2018), the total outstanding amount of which decides whether the company has to provide collateral to a group of its senior creditors. If CCU can get a declaration in the Texas state court that the portion of the 2016 notes they leave unpaid counts towards the threshold - no collateral is due if the legacy notes outstanding amount is above $500mln -, they will be able to frustrate people who have previously tried to push the biggest US radio company into bankruptcy. Failing to pay on time some of their bonds could also trigger CDS referencing CCU, which would inevitably reshuffle holders of the company's debt, making negotiations of a turnaround plan potentially easier. If a company which has plenty of cash and intentionally defaults on a maturity payment triggers CDS, many market participants will certainly be left scratching their head. Investors did not wait to get a definitive answer on that issue and they decided to bid aggressively short dated protection, which incidentally pushed all old series of CDC HY sharply wider.