Hedge Funds Smell Blood as Lenders Turn on Each Other

iHeartMedia Inc. is the owner of a sprawling network of US radio stations that pumps out music and chat everywhere from New York City to Fairbanks, Alaska. In recent weeks, however, it has been much more selective when addressing one crucial audience: its worried lenders.

As the struggling broadcaster ponders a way to refinance billions of dollars of debt, it has started confidential talks with a privileged group of creditors led by fund giant Pacific Investment Management Co. Its other debtholders, meanwhile, have been left on tenterhooks, waiting anxiously by the phone to learn whether they’ll be cut out of any ...