CC's $1.6-Billion

[SirRoxalot]

Clear Channel emptied their "six-year revolving credit facility" last week, stuffing $1.6-Billion into the corporate mattress. That money comes at a price - about $75-million per year in interest. That ain't chicken feed for a company that whacked over 1800 people because they're cash-strapped.

You can get more details from http://seekingalpha.com/article/119883-clear-channel-preparing-for-chapter-11

It makes you wonder what they're up to. Could they be grabbing all the cash that they can find in advance of filing Chapter 11 Bankruptcy (reorganization). They'd likely end up as a Debtor In Posession (DIP), which would allow them to dump a ton of debt, stiff a bunch of creditors, and renegotiate the existing debt.

Maybe they have an idea that one of the other big groups is on the edge, and they're anticipating the chance to scoop up a bunch of radio stations on the cheap. It would be sort of a corporate version of "dollar cost averaging". Their overall debt would rise, but new stations that came at 3-5x multiples would likely help out their overall debt-to-revenue ratio. They'd likely have to sell off some stations because of concentration issues, but short-term they'd have even more leverage in setting advertising rates, and be able to take in even more revenue. Ultimately, the could cherry-pick from an expanded stations roster, and sell off losers for about what they paid for stations with better revenue prospects.

One other possibility is that they have some position in Sirius/XM that could really cut into their value if the satcaster goes bankrupt. Maybe they're trying to be a player in that high-stakes game?

It just seems curious. Last desperate cash grab? "Expand" their way out of trouble? Pay down more expensive debt? The plot thickens...

 

[davideduardo]

One other possibility is that they have some position in Sirius/XM that could really cut into their value if the satcaster goes bankrupt. Maybe they're trying to be a player in that high-stakes game?

It just seems curious. Last desperate cash grab? "Expand" their way out of trouble? Pay down more expensive debt? The plot thickens...

CC was down to under a 1% interest in XM when the merger took place. At one point, they had a significant participation, but since XM financed operating losses of about $7 billion through equity offerings, the dilution was extreme. After the merger, they have even less a stake and it is likely to have been written down as an impaired asset years and years ago.

If you read the WSJ, Forbes, Business Week, etc., you know that the biggest issue in business is the lack of borrowable money. So anyone who has a favorable line of credit is taking the money; it's better to pay the interest and have the money than to not have access to the money later. In this economy, everyone is seeking liquidity.

 

[SirRoxalot]

If you read the WSJ, Forbes, Business Week, etc., you know that the biggest issue in business is the lack of borrowable money.

Maybe you've hit on something. Maybe CC is getting into the loan sharking business.

"Pssst. Mel, you need a couple hundred million for a few weeks? Whattya got for collateral - and we mean real collateral, not that bogus paper you've been handing out..."

 

[Johnny.Sunshine]

Maybe CC is getting into the loan sharking business.

Maybe you just missed the point - perhaps there was a reason Ford didn't have to beg for money from the fed?