2016 Looms Large For Clear Channel's $10 Billion Debt

Looming

MOODY'S INVESTORS SERVICE has issued a report that CLEAR CHANNEL COMMUNICATIONS is facing a stiff challenge in managing the more than $10 billion of debt that will come due in 2016. They write that the company may be forced into a restructuring of its balance sheet. "The possibility of a restructuring or a distressed exchange remains high," team of MOODY'S analysts headed by SCOTT VAN DEN BOSCH said in the report. "Efforts to avoid a restructuring and refinance or extend its debt load will likely depend on the receptivity of the financial markets and moderate underlying interest rates."

REUTERS notes, "The media and entertainment company, rated Caa2 with a stable outlook, has made progress in dealing with near-term maturities, but by 2016 it will have debt levels that are greater than its expected asset value."

CLEAR CHANNEL has yearly debt to pay, and REUTERS sees the company making its 2013 payment of $312 million, 2014 payment of $1.3 billion and 2015 payment $250 million without any problems.

The biggest problem for CLEAR CHANNEL according to the MOODY'S report is $8.2 billion of bank debt due in JANUARY 2016, followed by another payment of $D1.9 billionn due later that year.

"If CCU is to have a realistic chance of refinancing $10.1 billion in debt in 2016, its operating performance will need to improve well above current levels," said VAN DEN BOSCH.

MOODY'S sees only one scenario that provides a sunny outlook, and that assumes revenue growth of 1% in 2012, followed by 2% in 2013, 4% in 2014 and 4% in 2015. REUTERS notes, "that would help reduce debt to EBITDA and bring down debt leverage to a level at which equity would be about breakeven and the company could generate $250-300 million a year."

"This scenario could position the company to refinance or extend its 2016 maturities and allows for other opportunities to delever the balance sheet," said MOODY'S.

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