The Federal Communications Commission will allow more foreign investment in iHeartMedia — up to 100%, subject to certain conditions.
“We find that the public interest would not be served by prohibiting foreign investment in iHeart, the owner of over 850 radio broadcast station licenses, in excess of the 25% benchmark set forth in … the [Communications] Act,” wrote Albert Shuldiner, chief of the Audio Division of the Media Bureau.
The FCC has the discretion to allow higher levels of foreign investment in a broadcaster’s U.S. parent company. iHeart asked to be allowed to exceed the 25% cap because, in coming out of bankruptcy last year, it issued new stock and special warrants but was required to seek approval to exceed 25% so that foreign investors could use their warrants to buy stock.
A 2016 commission order made it easier for U.S. broadcasters to seek this type of outcome. Since then, the FCC has eased or waived the 25% cap in several cases. iHeart’s role as the country’s largest radio station owner makes it notable, but the FCC recently also gave a similar ruling in favor of Cumulus Media.
“The FCC’s decision will enable holders of iHeartMedia warrants to have those warrants exchanged into Class A or Class B shares of iHeartMedia common stock,” the company stated. It said the ruling “will afford iHeartMedia flexibility to accommodate increased foreign investment that may result from share purchases by the public.”
The nine-page ruling includes a summary of the role and investment structures of the specific companies concerned: PIMCO Group and Invesco Group. iHeart had estimated that if their warrants were fully exercised, its foreign equity interests would be about 64% and foreign voting interests around 70.5%. iHeart emphasized that the investments mostly involve U.S. subsidiaries of businesses based in Germany and Bermuda, two close allies and trade partners.
In its petition, iHeart also argued that lifting the cap would serve the public interest by enabling it to better compete, incentivizing foreign investment and encouraging reciprocal opportunities for U.S. companies elsewhere.
The company will still have to obtain FCC approval for any new or additional foreign entity to control more than 5% (or more than 10% for certain institutional investors).
The commission rejected an argument by one petitioner that this outcome would put national security at risk. The FCC said the Departments of Justice, Defense and Homeland Security signed off, as long as iHeart abides by commitments it made to DOJ including designating a Security Officer who is a U.S. citizen and certain reporting requirements.