Posted by madcityradio.com on June 04, 2009 at 09:04:38:
Clear Channel lenders threaten refinancing plan
By Henny Sender and Andrew Edgecliffe-Johnson in New York
Published: June 3 2009 23:32 | Last updated: June 3 2009 23:32
Some of the largest lenders to the private equity groups that led the $23.8bn buy-out of Clear Channel Communications intend to turn down a proposed debt exchange, hoping to drive the radio and outdoor advertising company towards default.
The company, taken private in a leveraged deal that came to symbolise the excesses of the buy-out boom, has proposed a swap of some parent company debt for debt in Clear Channel Outdoor Holdings, its listed billboard division, regarded as a crown jewel despite the current steep advertising downturn.
However, some of its largest senior creditors say they would rather wait, in the hope the company will violate its lending agreements, enabling them to force a default and to take control of its equity at a steep discount. Clear Channel declined to comment.
Negotiations continue and the company is not yet violating its covenants. Default could be averted by an agreement with lenders or a reversal of the advertising slump that has affected radio and outdoor advertising businesses particularly severely.
Shares in Clear Channel Outdoor leapt 56 per cent to $5.62 when it announced plans to refinance a $2.5bn intercompany note on Tuesday. Barclays Capital analysts said a parent company bankruptcy filing could benefit the outdoor business.
The debt exchange efforts pit Bain Capital and Thomas H Lee Partners, the private equity owners, against lenders including Apollo Management, Blackstone’s GSO, Centerbridge Partners, OakTree Capital and Wall Street firms that provided the deal’s original financing. Bain and TH Lee own about $2.5bn of senior debt and will throw their weight behind the proposed exchange.
But the intention of some Wall Street lenders to resist it indicates the diminished power of even the largest private equity groups.
Agreed at the peak of the credit markets in 2006, the original Clear Channel buy-out would have seen Bain and TH Lee put up only 6 per cent of the total value, making the purchase one of the most leveraged deals on record. Bad feeling between the banks and the sponsors once credit markets turned spilled into the courts. It took until July 2008 for the two sides to complete a deal on revised terms.
Banks swiftly wrote down the value of the loans, selling some to Bain, TH Lee and to hedge funds.
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