Clear Channel looking to restructure


CC Media Holdings/Clear Channel Communications is said to be looking for ways to reorganize its massive debt load in the wake of disappointing earnings reports. The company has been shaving expenses, and cut 9% of its workforce, or 1,850 jobs, but a 12% decline in Q4 2008 revenue followed by a 23% decline in the first quarter of this year is putting it in danger of missing loan covenants.

Both Moody’s Investor Service and Standards and Poors have said that Clear Channel is in danger of missing covenants, and just recently an article in MSN Money pegged it as one of the top ten bankruptcy endangered companies in the US, a list that includes fellow broadcast giant Univision and other companies such as Ford and GM.

The company is considering bringing in financial advisors to help it develop options and work through the situation, and also filed to exchange two classes of bonds worth $2.3B so that they can be traded publicly. Clear Channel will receive no proceeds from the exchange.

RBR/TVBR observation: It might make sense that they would hire a consultant to work on restructuring their capital structure. But we think the SEC bond registration just filed was nothing more than a very routine action required by the terms of the original bonds.

However, if revenues keep falling Clear Channel would at some point have to worry about a covenant breach. Having sued their bankers to get the deal closed, those banks are not likely to cut them any slack when it comes to renegotiating any terms. So, they would need to look at other alternatives. The most obvious one would be finding a new investor to make a cash infusion to keep them in covenant compliance. However, that would mean a major dilution for TH Lee and Bain Capital. There are no easy answers.

Related Reports follow the pattern:
4/20/09 – Clear Channel waxes Congress
4/20/09 – Early peek at Clear Channel’s numbers
4/17/09 – The Clear Channel mirror
4/16/-09 – CC Radio: Less local programming = more local PSAs
4/16/09 – Clear Channel putting more Non-Local programming on stations
4/14/09 – Clear Channel adding syndicated programming in local markets