Far From 'Negative,' Reuters Finds Clear Channel 'Gets Investors To Believe'
May 5, 2014 at 3:57 AM (PT)
Not everyone has a "negative" view of CLEAR CHANNEL's debt situation. On FRIDAY (NET NEWS 5/2), ALL ACCESS reported FITCH RATINGS, assigned a "C/RR6" rating to CCU ESCROW CORP.'s $850 million 10% senior notes due 2018. FITCH wrote, "Proceeds from the offering, are expected to be used to fully redeem CLEAR CHANNEL COMMUNICATIONS, INC.'s 5.5% senior unsecured notes due 2014 ($409 million publicly outstanding), 4.9% senior unsecured notes due 2015 ($241 million) and fees related to the offering and note redemptions. In addition, CLEAR CHANNEL intends to redeem approximately $159 million of 2014 notes held at CC FINCO (an unrestricted subsidiary), with the proceeds of the redemption to be used for general corporate purposes."
So what does a "C/RR6" rating mean. FITCH simplified it, noting "The Rating Outlook for CLEAR CHANNEL is Negative." The ratings service implies CLEAR CHANNEL can pay its bills right now, but is piling up interest cost and won’t be able to reduce the debt load for several years.
TODAY (5/5), MARIANA SANTIBANEZ writes for REUTERS that, "CLEAR CHANNEL COMMUNICATIONS made the most of the frothy high-yield market this week, printing a new deal to chip away at its 2016 maturity wall, which analysts last year thought could lead to a default. While the U.S. media giant paid a price for the $850m trade -- a 10% coupon on just a 3.75-year maturity -- it succeeded in convincing investors it will be able to navigate the road ahead."
"The due debt in 2016 is meaningful, but it is significantly lower than it was, say, 12 to 18 months ago," HERMES FUND MANAGERS co-head of credit MITCH REZNICK told REUTERS.
"With every transaction like this that CLEAR CHANNEL completes, it increases the likelihood that it will scale the 2016 maturity wall," said CREDITSIGHTS analyst KAREN KLAPPER.
The bottom line? The report found "Many in the market said the trade's success was ultimately down to belief in the CLEAR CHANNEL story," and "while the refinancing will increase its interest burden by $40m-$45m -- and will clearly hurt already strained cash flows -- it has around $660m on its balance sheet."