Clear Channel Outdoor gets an upgrade


Caris & Co. upgraded the billboard company to “average” from “below average.” Ironically, the move comes just days after a New York Post story trashing the company and its majority owner, Clear Channel Communications.

You couldn’t really call Caris analyst David Miller a bull on the stock, but while he said it did not appear that business had improved for CC Outdoor and that the company was cutting rates to hold onto market share, it’s his view that the strategy is already built into the stock price. So he moved his rating up a notch.

Meanwhile, a source close to Clear Channel Communications said the NY Post was incorrect in reporting that there were no takers for the bond sale that was shopped by CC Outdoor to replace a $2.5 billion loan from the parent company. There were plenty of takers, the source told RBR/TVBR, but not on terms that were deemed attractive. So, Clear Channel continues to evaluate its options.

As explained in analysis recently by Moody’s Investors Service, refinancing the intercompany loan would reduce the likelihood of a loan covenant breach by Clear Channel Communications in the coming months. Receiving $2.5 billion in cash from CC Outdoor would likely keep the parent company in covenant compliance not only through 2009, but 2010 as well.

Some investment funds who bought Clear Channel Communications debt from the banks who funded (reluctantly) the private equity buyout by Bain Capital and TH Lee last year are believed to be hoping for the opposite – that the company would breach its covenants and be forced to file bankruptcy. They’re hoping for a quick payout from forcing a sell-off of assets, rather than a long run as bankers for the Clear Channel debt.