Clear Channel 'Burning Cash To Delay Reckoning' Writes Bloomberg
December 2, 2013 at 3:49 AM (PT)
BLOOMBERG NEWS writer KRISTA GIOVACCO offers a tough appraisal of the state of CLEAR CHANNEL COMMUNICATIONS' finances in an article published FRIDAY (11/29). She writes, "CLEAR CHANNEL COMMUNICATIONS INC. is offering to double interest to push out maturities on some of the $4.3 billion it owes, just as the most-leveraged U.S. broadcaster suffers the first cash-flow deficit in four years."
Last week (NET NEWS 11/25), CLEAR CHANNEL asked for more time for its upcoming loans, and reported it was looking to extend $1.0 billion in aggregate principal amount of outstanding term loans B and C due JANUARY 2016 until JULY 2019, with the same security and guarantee package as the outstanding term loans B, C and D.
"While the proposal gives CLEAR CHANNEL more time to turn around a business that’s posted losses every year after BAIN CAPITAL PARTNERS LLC and THOMAS H. LEE PARTNERS LP took control in 2008, it also raises the company’s risk of missing interest payments on $20.7 billion of debt, according to MOODY’S INVESTORS SERVICE. After capital expenses, CLEAR CHANNEL ran a deficit from operations in the year ended JUNE, meaning the company had to eat into cash that’s declined more than 60% since the end of 2010 to $704.2 million."
“Refinancing at a higher rate is never a positive,” MOODY'S Sr. Analyst SCOTT VAN DEN BOSCH told GIOVACCO. “It’s not a cure-all, but it buys them time to improve the balance sheet.”
“These extensions are really a mixed bag in terms of credit quality, with the benefit of extending maturities offset by significantly higher interest costs,” noted KDP ADVISORS INC. analyst SPENCER GODFREY.
The BLOOMBERG report also notes, "CLEAR CHANNEL’s interest expenses have surpassed its operating income in every quarter since the end of 2008," and says the company's "earnings before interest, taxes, depreciation and amortization have shrunk to $1.8 billion in the 12 months ended JUNE 30th from $2.3 billion in 2007."