Will Lamar Purchase of CCO Help iHeart?


clear-channel-outdoorAnalysts had been speculating at least some of the proceeds from the sale of Clear Channel Outdoor to Lamar Advertising would help iHeartMedia reduce its $20B debt load.

Fitch Ratings says neither iHeart nor CCO’s ratings are affected.

One transaction covers Reno, Nev.; Des Moines, Iowa; and Seattle. Those markets generated $40.9M in net revenues (trailing 12 months). The other covers Cleveland and Memphis, Tenn.; those markets generated $35.6M in net revenues. The $458.5M deal price is a blended multiple of 12.5 times the five markets.

Fitch notes that the combined LTM OIBDAN of the assets sold represents approximately 5% of CCOH’s total LTM OIBDAN. In addition, the 12.5x blended sale multiple exceeds iHeart’s total leverage of 11.6x and represents a potentially delevering event.

The company did not disclose any specific use of proceeds but, given iHeart’s current capital structure, Fitch expects that a portion of the proceeds may be used to indirectly fund a dividend to CCOH’s stockholders, including iHeart. Fitch also expects iHeart to use any potential dividend proceeds for general corporate purposes, including repurchasing or making payments on its existing indebtedness.

Moody’s Investors Service too, says the sales could improve liquidity at parent iHeart Communications. iHeart will see increased chances of buying back debt (which amounts to more than $20B) at a discount or to execute a distressed exchange.

The $458.5 million deal closed Friday.