The Wall Street Journal has been dissecting the CCU agreement, and notes that all parties decided there would be more pain if the deal cratered than if they all agreed to assume a fair share of the pain of a restructured deal. CNNMoney notes that next up for a spanking are the shareholders, and notes that they’ll have little choice but to take some pain as well.
A catalyst for trouble, according to WSJ, was the banks wondering why CCU wasn’t being restructured in the face of diminishing economic conditions as were other buyouts; they were worried about taking on additional debt, wanted a higher interest rate and less to finance, if they couldn’t simply walk away from the deal. Clear Channel wanted to avoid a stock price freefall if the deal cratered, and the equity funds wanted to stay out of court, which they saw as an uncomfortable gambling proposition. Cooling tempers led to a pragmatic approach which in turn led to the new $36/share agreement.
CNNMoney notes that the price for shareholders may be lower than it was a year ago, but the prospects for the radio industry are also lower. It quotes CL King’s Jim Boyle, who notes that continuing weakness in radio revenue results don’t provide shareholders with much of an argument to raise the price per share.
RBR/TVBR observation: This started out as a mammoth deal, and for over a year, we’ve been watching it as financial forces of nature have battered it, sanded it, eroded it and smoothed it into something different. Its original outlines are still recognizable, and it would appear that the prevailing CW is that this time the principals have gotten it right. But the finish line is still three months away, offering plenty of time for a new bombshell or two.