The coffers are full at Clear Channel Communications, after the company drew the remaining $1.6 billion available under its revolving credit facility. What will the cash be used for? The company says it just wants to “improve its liquidity position” in light of the economy.
Here is the entire statement filed with the SEC: “Clear Channel Communications, Inc. (“Clear Channel”), a wholly owned subsidiary of CC Media Holdings, Inc. (the “Company”), has borrowed the approximately $1.6 billion of remaining availability under its $2.0 billion revolving credit facility. Clear Channel made the borrowing to improve its liquidity position in light of continuing uncertainty in credit market and economic conditions.”
The draw of the remaining $1.6 billion came just after Moody’s Investors Service said it had placed $23 billion of debt at Clear Channel Communications under review for a possible downgrade. Moody’s said it had previously anticipated that radio revenues would be down 10-15% in 2009, but that pacings are now worse than that.
RBR/TVBR observation: The credit markets were a bit surprised by the Clear Channel move, but it kind of makes sense. Ford Motor Company set the example by borrowing all it could in anticipation of a tough period. Now, it is the only one of the Big Three that hasn’t drawn on federal bailout loans and the restrictions they carry. Clear Channel management figures, correctly, that it is easier to have the cash on hand than risk lenders balking at handing it over if the economy gets a lot worse.