Clear Channel Arranges More Time To Pay Off Debt
June 3, 2013 at 3:55 AM (PT)
Late FRIDAY (5/31), CLEAR CHANNEL closed on its previously announced offer to "amend CCU's cash flow credit facility pursuant to which Term Loan B lenders and/or Term Loan C lenders agree to extend the maturity of a portion of their loans due 2016 through the creation of a new $5.0 billion Term Loan D facility due JANUARY 30, 2019."
The move gives the company an extra three years to pay down its debt.
Approximately $6.7 billion in aggregate principal amount of term loans was submitted for extension in the offer and, accordingly, "the amount of each lender's term loans that was accepted for extension was reduced by a proration factor of approximately 74.6808%," noted CLEAR CHANNEL.
Less than one month ago (NET NEWS 5/13), MOODY'S INVESTORS SERVICE assigned a "Caa1" rating to CLEAR CHANNEL's then proposed $1.5 billion term loan D. CLEAR CHANNEL's "Corporate Family Rating" remained unchanged at "Caa2." MOODY's expressed its concern, writing "CLEAR CHANNEL's Caa2 (CFR) reflect the very high leverage levels of 11.4x on a consolidated basis (excluding MOODY's standard lease adjustments) and $8.6 billion of debt due in 2016 (pro-forma for the proposed exchange offer). The ratings also include weak free cash flow and interest coverage of 1.4x which will be further pressured by higher interest rates from future refinancings or extensions of its debt maturities. While the company has made progress extending its debt maturity profile, more progress will be needed and the anticipated increase in interest rates could be material. Even if CLEAR CHANNEL is able to refinance its 2016 maturities, the company will remain vulnerable to a slowdown in the economy given the heightened sensitivity that its radio and outdoor businesses have to economic conditions. The combination of higher interest rates from a refinancing and lower EBITDA in the event of a future economic downturn could materially impair its interest coverage and liquidity position. In addition, there are secular pressures on its terrestrial radio business that could weigh on results as competition for advertising dollars and listeners are expected to increase going forward. Also incorporated in the rating, is the expectation that leverage levels will remain high over the rating horizon compared to the underlying asset value of the firm."
Upon the closing of this offer, CCU's cash flow credit facility consists of an approximately $3.0 billion Term Loan B facility which matures on JANUARY 30th, 2016, an approximately $198.2 million Term Loan C facility which matures on JANUARY 30th, 2016 and a $5.0 billion Term Loan D facility which matures on JANUARY 30th, 2019.
Concurrently with the closing of the offer, CCU entered into an amendment to the agreement governing its cash flow credit facility, which permits CCU to make AHYDO catch-up payments beginning in MAY 2018 with respect to the new Term Loan D facility and any notes issued in connection with CCU's previously announced exchange offer with respect to its outstanding 10.75% Senior Cash Pay Notes due 2016 and 11.00%/11.75% Senior Toggle Notes due 2016.
The new Term Loan D facility has the same security and guarantee package as the outstanding Term Loans B and C and borrowings under the new Term Loan D facility bear interest at a rate equal to, at CCU's option, adjusted LIBOR plus 6.75% or a base rate plus 5.75%.