S&P Global Ratings on Dec. 21 upgraded its corporate credit rating on iHeartMedia Inc. and unit iHeartCommunications Inc. to CC from SD.

The rating agency took the action following iHeartCommunications' offer to exchange its 10% senior notes due 2018 for its priority guarantee notes due 2021. As iHeartMedia's debt is trading at notable discounts to par of 25% to 50%, S&P believes that the company's capital structure is unsustainable.

"If the 10% noteholders accept the offer by Jan. 4, 2017, they would receive an equal amount of par value of the priority guarantee notes," the agency said. However, S&P believes that the holders of the 10% notes face a substantial risk of nonpayment if they do not accept the exchange. Further, if the noteholders accept the exchange, it would result in them "accepting securities that mature slightly more than three years beyond the 10% note maturity, and securities equivalent to priority guarantee notes that are currently trading roughly 25% below par value."

In the event that iHeartCommunications goes through with the exchange offer, S&P will consider it distressed and tantamount to a default, based on the agency's criteria. The company owes more than $20 billion in debt and depends on asset sale proceeds, and favorable business, financial and economic conditions to meet its financial commitments.

The ratings outlook is negative.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.