| |||||||||||
| |||||||||||
 The $24 billion LBO of Clear Channel Communications Inc. was one of the last megabuyouts to get done, with the deal's private equity sponsors -- Thomas H. Lee Partners and Bain Capital -- actually having to sue the banks, which had tried to back out of their commitments to finance the deal after the credit crunch began. But if a story in Thursday's New York Post is on target, the banks may have been right all along, as the media company's crushing debt load has it considering asset sales, debt restructuring and even a prepackaged bankruptcy. According the Post story: "[Clear Channel] has begun reaching out to lenders about restructuring the company's massive debt load just nine months after the company was acquired. ... As part of those discussions, one topic being debated is a pre-packaged bankruptcy, one source said. A second person familiar with the matter stressed the talks are at an early stage. ... One source said the company will generate $1.2 billion in cash flow this year, even though it has $1.6 billion in interest payments. A second source pegged the cash flow at $1.7 billion." Clear Channel's roughly $18 billion in long-term debt, coupled with the recession's downturn in advertising spending, has certainly hurt the company's bottom line. Clear Channel reported a $418 million first-quarter loss recently. The Post isn't the first to talk about the need for Clear Channel to work out a new deal with its creditors. Last March, Moody's Investors Service downgraded Clear Channel's corporate family rating to Caa3 from B2 over concerns that it will violate debt covenants and a restructuring will be necessary. And in February, the company revealed in a regulatory filing that it has drawn the remaining $1.6 billion under its $2 billion revolver. The company has been trying to reduce its debt load by scooping up notes on the open market, as it now trades at steep discounts. Late last year, Clear Channel wrapped up a cash tender offer for its senior notes at various discounts ranging from $175 to $650 of $1,000 principal value. (The Deal Pipeline subscribers can read the full story.) If Clear Channel is indeed quickly burning through its cash -- it has an estimated $1.6 billion in the bank, enough to last 18 months -- it's likely that management will go for a restructuring of the company's debt load sooner rather than later, just in case the economy turns the terms on DIP loans sour. - George White See NY Post story See Deal Pipeline story on Clear Channel debt See Clear Channel Dealwatch See PE-backed bankruptcy Dealwatch
CategoriesPrivate capital video
Categories
Blog roll
Archives
| |||||||||||
|
|
|
|
|
©Copyright 2009, The Deal, LLC. All rights reserved. Please send all technical questions, comments or concerns to the Webmaster.
