Event Publicly Available Information:
This statement is submitted in connection with the general interest question posted to the ISDA Credit Derivatives Determinations Committee (the “DC”) regarding the earliest Credit Event Resolution Request Date that would be applicable in the event that a Failure to Pay Credit Event is declared with respect to iHeartCommunications, Inc. (“iHeart”).[1] This statement takes no position as to whether or not a Failure to Pay Credit Event occurred. Its purpose is solely to request that, if the DC does determine that a Failure to Pay Credit Event occurred, the DC should also confirm that the Credit Event Resolution Request Date for any such Failure to Pay Credit Event would occur no earlier than December 20, 2016.
iHeart is the issuer of $250 million in aggregate principal of 5.50% Senior Notes maturing on December 15, 2016 (the “5.5% Notes”). The submissions made by various market participants through Linklaters LLP (the “Linklaters Memorandum”) and Paul, Weiss, Rifkind, Wharton & Garrison LLP (the “Paul Weiss Memorandum”), while making opposing contentions as to whether or not a Failure to Pay Credit Event has occurred, correctly point out that the date of such Credit Event would be December 20, 2016, which is the end of the third Grace Period Business Day following the scheduled principal payment date under the 5.5% Notes.[2] Specifically, Section 1.46(c) of the 2014 Definitions (“Grace Period”) applies a deemed grace period of three Grace Period Business Days where, as here, no grace period applies under the terms of the applicable indenture.
Under Section 1.30 of the 2014 Definitions, a Credit Event Resolution Request Date is defined with respect to a DC Credit Event Question as “the date as publicly announced by the DC Secretary that the relevant Credit Derivatives Determinations Committee Resolves to be the date on which the DC Credit Event Question was effective and on which the relevant Credit Derivatives Determinations Committee was in possession of Publicly Available Information with respect to such DC Credit Event Question.” Section 1.26 of the 2014 Definitions contemplates that a DC Credit Event Question will be submitted once the event potentially constituting a Credit Event “has occurred”.
Here, the DC Credit Event Question could not be effective prior to December 20, 2016, which is the date that the Failure to Pay Credit Event, if any, would occur if, in effect, a Potential Failure to Pay occurred on December 15, 2016. The result is that the Credit Event Resolution Request Date also can be no earlier than December 20, 2016, regardless of when the question as to whether a Credit Event has occurred was submitted to the DC. We are aware of two Credit Event Questions (Sterling Biotech Limited and Temirbank) previously having been submitted to a DC at the time of a Potential Failure to Pay -- i.e., before expiration of the relevant actual or deemed grace period. In both cases, the DC considered a question as to the appropriate Credit Event Resolution Request Date and designated a date on or after the date on which the relevant Failure to Pay Credit Event occurred as the Credit Event Resolution Request Date.[3]
If the DC finds that a Failure to Pay Credit Event has occurred (and this statement takes no position as to whether it should), the Credit Event Resolution Request Date should be set no earlier than December 20, 2016. Such a date would be consistent with prior practice and a straightforward application of the 2014 Definitions, and would avoid potential anomalies under which an Event Determination Date might occur under Section 1.16(a)(ii) of the 2014 Definitions prior to the occurrence of the Credit Event itself.
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We confirm that a copy of this statement may be provided for information purposes only to the members of any Credit Derivatives Determinations Committee convened under the DC Rules in connection with the iHeartCommunications, Inc. General Interest Question to consider the issues discussed herein, and that it may be made publicly available on the ISDA Credit Derivatives Determinations Committee website. We accept no responsibility or legal liability in relation to its contents.
[1] Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the 2014 ISDA Credit Derivatives Definitions (the “2014 Definitions”) or the 2016 ISDA Credit Derivatives Determinations Committees Rules (January 20, 2016 version) (the “DC Rules”).
[2] See Paul Weiss Memorandum, Section III.A.4 (“The Deemed Grace Period Has Lapsed”); Linklaters Memorandum, Section 3.4 (“Grace Period”).
[3] We note that both Sterling Biotech Limited and Temirbank were decided under the then-applicable Credit Derivative Definitions (i.e., the 2003 ISDA Credit Derivatives Definitions, as supplemented by the July 2009 Supplement that added the DC (collectively, the “Prior Definitions”)), rather than the 2014 Definitions. However, the definition of Credit Event Resolution Request Date in the Prior Definitions is substantively the same in all material respects as the definition of that term in the 2014 Definitions – both require publicly available information along with an effective request notice as to an event that “has occurred.”