The Financial Times reports that the way Clear Channel Outdoor plans to refi the $2.5 billion it owes parent Clear Channel Communications is to do a swap with holders of the parent company’s debt. But the FT says some debt holders are resisting because they’d rather see the parent wind up in default.
Clear Channel isn’t commenting on anything beyond the announcement, which listed alternatives as “an offering of new senior or senior subordinated notes for cash or an exchange of new senior or subordinated notes for outstanding indebtedness.”
The FT story suggests that some of the private equity groups that bought up some of the bank debt from the Clear Channel buyout at discount prices are now playing hardball. Rather than help clean up the balance sheet, they’d rather see CC Media Holdings, the parent company created for the buyout, default on the terms of its debt so they could then take control of Clear Channel on the cheap. The story mentioned Apollo Management, Blackstone’s GSO, Centerbridge Partners and Oaktree Capital as private equity firms that now hold debt from the Clear Channel buyout.
But Bain Capital and Thomas H. Lee Partners, the principal owners of CC Media Holdings, also bought up debt from the bankers who were willing to sell it at a discount. According to the FT, the two own around $2.5 billion in face value, so they could conceivably do the exchange without participation by any other holders.
RBR/TVBR observation: This is a high stakes, complicated game of chess. We’re glad we’re not involved, but it will be interesting to watch.
It’s pretty clear to us that some of the debt holders are trying to put pressure on CC Media Holdings by leaking stories about the negotiations to the New York Post and the FT. For now, though, it’s all talk because Clear Channel isn’t on the brink of a default. Look for things to heat up if the economy stays bad and Clear Channel’s balance sheet gets worse.