Clear Channel Communications is poised to collapse if it can’t restructure its debt in the next few years, the New York Post reported in an April 24 piece citing several unnamed sources.
Published on the eve of the National Association of Broadcasters confab in Las Vegas, the largest radio industry gathering of the year, the Post reported that’s exactly what some of the company’s largest creditors want.
Clear Channel’s private-equity owners, Bain Capital and THL Partners, are reportedly in negotiations in an attempt to refinance its “crippling debt” and not faring very well, one unidentified source told the tabloid, which is owned by Rupert Murdoch’s NewsCorp.
A spokesman for Bain and THL denied to the paper that there have been any discussions since December.
Bain and THL took Clear Channel private in a $24 billion leveraged buyout in 2008. Sources told the Post that if the media giant can’t change its capital structure, it faces default on $18.4 billion in debt.
While the market for loan refinancing is said to be hot, two large CC creditors – Centerbridge Partners and Oak Tree Capital Management – want to own Clear Channel and are willing to wait it out, a source told the paper.
One group of lenders threatened in December to sue Clear Channel if it attempted to rob Peter to pay Paul by raising new debt at its Clear Channel Outdoor billboard subsidiary in order to pay CC debt.
What the company did do is raise $2.5 billion by changing the terms of the loan so it didn’t need approval, enabling the conglom to avoid a near-term default, the Post reported.
Radio and advertising markets have taken huge hits in recent years, and Clear Channel hasn’t been immune. It has sold some stations, while others have resorted to syndicated programming and eliminating on-air and sales staff. Jim Brady, a former CC sales director in Albany, N.Y., told the Post that Clear Channel has made too many cuts to recover.
Clear Channel generates $1.4 billion in cash flow while paying $1 billion in interest and spending $200 million in capital expenditures, leaving just $200 million in annual free cash flow. While it has receivables of $700 million in May 2011 and $4.5 billion due in July 2014, the sources told the Post it wouldn’t be enough to save CC from defaulting on the $18.4 billion debt.
Clear Channel Communications was the parent company of what was spun off to become Live Nation in 2005.