It doesn’t really matter to the parent company of Clear Channel Communications, since it sold the debt to six big banks when the going private deal closed after an out-of-court settlement. It looks like the banks are going to try to offload another big chunk of that debt next week – and take a substantial haircut.
Baring an economic miracle to make the US economy rebound (and we’re pretty sure we would have heard if there had been one) the banks were guaranteed to lose money on financing the long-delayed Clear Channel deal. The terms, after all, were agreed on when things looked much brighter. The only question was just how much they would lose.
The first round of debt resold from the Clear Channel financing, part of the secured bank loan, has been trading at about 83% of face value, according to Private Equity News. What’s being offered now is $980 million from the $2.3 billion bridge loan. It ranks lower in priority, so the speculation is that it will carry an even steeper discount – say 70 cents on the dollar. The 10.75% coupon produces a yield in the mid teens – put also carries significant risk,
With the US credit markets tight, there haven’t been a lot of large junk bond sales lately. According to the Wall Street Journal, only two deals were priced in the entire month of August for a total of $504 million.