There was optimism at the financing session in Charlotte that the current credit crunch will moderate, but no one was predicting a quick return to the type of market that we saw a few months ago before problems in the sub-prime mortgage market spread out and made credit tighter for everyone. Deutsche Bank investment banker Drew Marcus expressed confidence that the Clear Channel buyout will go to closing because the commitments are in place, but he noted that the terms for that deal are not available in the market today. "The banks are all under water. We’ll lose money on that financing," he said.
As one of the buyers in the Clear Channel deal, Soren Oberg of Thomas H. Lee Partners expressed the belief that the credit tightening will only be temporary. "There’s no doubt the tightening of credit availability has limited the ability of equity capital as well for all transactions, including radio transactions," he noted. But with radio’s strong cash flows, he suggested that it might be one of the sectors to lead the way out of the credit crunch.
But while mega deals may be few for a while, there is still financing available for smaller deals and interested buyers. Garrett Komjathy of GE Commercial Finance said many of his existing clients are anxious to buy spin-offs from the Clear Channel, Cumulus and other mega deals.
RBR/TVBR observation: For those of who were around for the HLT credit crunch in the early 1990s, this credit tightening, though painful for many, is nowhere near as devastating as what happened then. No one is rushing to sell radio and TV stations for deeply discounted prices. Lenders aren’t fleeing the broadcasting business. There are differences of opinion on how quickly investor money will flow back into the market to back mega deals, but for routine deals it’s business as usual, with perhaps less generous terms. Life goes on.