Clear Channel to stay ‘opportunistic’ on debt, use intercompany notes

By Paul Deckelman

New York, July 23 – CC Media Holdings, Inc., the corporate parent of radio broadcaster and digital media operator Clear Channel Communications Inc. and billboard giant Clear Channel Outdoor Holdings, Inc., plans to stay “opportunistic” in managing its quite complex capital structure totaling over $20 billion of debt, company executives said Wednesday.

Among the tactics that San Antonio, Texas-based Clear Channel is using to deal with its near-term maturities while preserving its access to the capital markets is the use of intercompany debt issued to its subsidiaries, with proceeds used to take out its short-duration obligations.

For instance, just on Monday of this week, Clear Channel announced it will issue and sell $222.2 million of new 14% senior notes due 2021 to indirect wholly owned subsidiary CC Finco, LLC in a transaction structured as an add-on to the company’s existing 2021 notes. It will then use the proceeds of that private-placement intercompany deal to redeem all $94.3 million of its currently outstanding senior cash pay notes due 2016 and all $127.9 million of its senior toggle notes due 2016. Those two issues are slated to be redeemed on Aug. 22.

Clear Channel’s senior vice president and treasurer, Brian Coleman, told analysts on the Wednesday conference call following the release of the company’s results for the 2014 fiscal second quarter ended June 30 that the key advantage of issuing such intercompany notes is that it gives Clear Channel “optionality.”

“They are currency that we have, that we have utilized in the past, that we have sold into the market,” he said, although he added that “there are no plans today to do anything with those notes” in terms of CC Finco reselling them.

“By structuring the transaction that was announced the way we have, we have preserved that refinancing capability but haven’t actually gone out and paid the yield we would have had to pay had we issued [them] to a third party.”

He said that “the way we look [at] it is we’ll continue to watch how those notes trade, we’ll continue to look at our liquidity needs, we’ll compare this liquidity option to other liquidity options we have, and whatever is the most efficient or effective, we’ll take a look at.”

Term loan debt looms

Clear Channel recently cleaned up some other near-term maturities with the proceeds from an $850 million issue of 10% senior notes due January 2018 that its CCU Escrow Corp. subsidiary brought to market earlier this year.

That quick-to-market offering priced at par on April 28 and was upsized from an originally announced $400 million.

The company used the deal proceeds on June 6 to redeem all of its outstanding $567.11 million of 5½% senior notes that had been slated to come due on Sept. 15 and its $241 million of outstanding 4.9% senior notes due May 15, 2015. The notes were redeemed at a make-whole price of 101.4316 for the 5½% notes and 104.2256 for the 4.9% notes, plus accrued interest for both issues.

Taking out those last tranches of 2014, 2015 and 2016 notes will leave $1.9 billion of term loan B debt due in early 2016 as the nearest-term maturity on the company’s horizon. The company plans to evaluate different refinancing alternatives.

Coleman told an analyst during the question-and-answer portion of the conference call that followed the formal presentation by Clear Channel’s president and chief financial officer, Richard J. Bressler, that the $1.9 billion “is likely a refinancing candidate.” He expressed his doubt at the suggestion by the analyst that the company might instead use non-core asset sales to at least partially pay off the debt.

For the moment, he said, Clear Channel has not yet decided what to do about that term loan debt.

“My view is we’ll continue to watch the markets. We want to, as we have in the past, be opportunistic [when] the markets are strong. They’ve backed up a little over the past few weeks, but they’re still, historically, pretty attractive. We’ll continue to look at whether refinancing some or all of the $1.9 billion makes sense. We’ll continue to have dialogue about it. We have dialogue all the time on it,” he said.

His own preference is “that we take a look at [it] this year, before we go current” – i.e., before the debt is classified on the balance sheet as “current” once it gets to within one year of its scheduled maturity.

“Whether that’s next week or three months from now, [we’ll give] no signal on this call. But obviously, we’re aware of it. We think the markets are attractive; we think they’re still attractive. We’ll continue to watch and be opportunistic,” he said.

‘Levers’ to enhance liquidity

During his presentation, Bressler said that “we continue to be comfortable with our maturity schedules in the near term and will continue to take disciplined and proactive steps to address our capital structure and liquidity” via capital market and, possibly, strategic transactions.

The company, he said, has “a number of levers available to enhance future liquidity” as it “continuously and aggressively” evaluates its “businesses and asset portfolios.”

He noted, for instance, that Clear Channel previously had “optimized” its assets via the sale of some non-core assets, divesting itself of its stake in Sirius XM Holdings, Inc. last year for $135.5 million and unloading its 50% holding in Australian Radio Network in February for A$246.5 million ($222.5 million). Last week, it sold its non-consolidated investment in a Hong Kong outdoor advertising business for about $15 million.

The company’s total debt at June 30 was $20.67 billion. That included $4.94 billion at Clear Channel Outdoor, which issues debt separately from its parent, although those obligations are included on the parent’s consolidated balance sheet, and the remaining $15.74 billion at CC Media Holdings.

Bressler said that after taking into account $798 million of parent-company cash on the balance sheet, CC Media’s net debt was about $19.9 billion. Its leverage ratio of secured debt as a multiple of 12-month trailing adjusted EBITDA was 6.4 times.

He said that Clear Channel Outdoor ended the quarter with $226 million of cash, its senior leverage ratio was 3.6 times, and its consolidated leverage ratio was 6.5 times.

© 2015 Prospect News.
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