N.Y. Post: Clear Channel Is 'Clearly Failing'; Clear Channel Says: 'Not So Fast'
July 6, 2009 at 10:57 AM (PT)
CLEAR CHANNEL COMMUNICATIONS is running out of options after its outdoor unit failed to attract interest in a $3 billion debt offering, setting the stage for the company to break its loan agreements later this year, reports THE NEW YORK POST. "Three weeks ago, the company's outdoor unit began aggressively pre-marketing the $3 billion bond sale, said one market participant whose firm got a flurry of calls about the deal. This person added that after some big-name buyers declined to participate, GOLDMAN SACHS, which was working on the outdoor unit's behalf, stopped making phone calls.
"I heard it was impossible to sell," the participant said. A second source, whose firm got calls about two weeks ago, also said the calls have stopped, and that the offering appears to have failed. CLEAR CHANNEL OUTDOOR HOLDINGS had hoped to sell the debt in two pieces, with one paying 10% in interest and the other paying 14%.
"Private-equity firms THL PARTNERS and BAIN CAPITAL bought CLEAR CHANNEL 10 months ago in a $27 billion leveraged buyout. However, the deal has been nothing but trouble for the buyers ever since, as the collapse of the advertising market -- CLEAR CHANNEL's lifeblood -- hurt earnings. That, in turn, has made the company vulnerable to defaulting on its massive debt load in the fourth quarter unless it renegotiates with its lenders or raises cash.
"CLEAR CHANNEL owns 89% of publicly traded CLEAR CHANNEL OUTDOOR. The outdoor business owes CLEAR CHANNEL $2.5 billion, and the debt it tried to raise would have been used to repay CLEAR CHANNEL, and increase the parent company's ability to stay in loan compliance.
"Even if CLEAR CHANNEL OUTDOOR was able to raise the cash through a debt offering, shareholders in the company are protesting the outdoor unit being used to help solve the parent company's problems. One CLEAR CHANNEL OUTDOOR shareholder said he is considering raising objections to the proposed debt offering, believing it impairs the company. The shareholder noted that currently CLEAR CHANNEL OUTDOOR pays CLEAR CHANNEL a 6% interest rate on the money it owes, and he's opposed to the company swapping that debt for an equal amount that pays twice that without some concessions from the parent.
"The biggest condition would likely be that CLEAR CHANNEL stop using the outdoor unit's cash to help fund its operations, enabling CLEAR CHANNEL OUTDOOR to keep more of its money for itself."
Clear Channel Responds
A source close to CLEAR CHANNEL tells ALL ACCESS: "There were plenty of takers for the bond offer but none of the cost structures that were proposed appealed to the company at this time.
"It's inaccurate to imply that a bond transaction is off the table. The Company may or may not do a bond deal. There is more than one way to restructure debt, and the Company continues to look at alternatives.
"The Company continues to generate huge amounts of cash, and insinuations that the process has failed are irresponsible and inaccurate."