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CCO is a great cash-generating business with high margins

iHeart's Bankruptcy Means a Stop to Raiding CCO

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I suspect you may be getting worn out with all this attention on Clear Channel Outdoor. I can tell by the amount of opens to the links that we may be wearing out the subject.  And just when I thought it best to give it a rest, this article just came on my radar.

Clear Channel Outdoors: iHeartMedia Bankruptcy Implications

This is to date, the best article I have read on the subject of the What’s Next for Clear Channel Outdoor.  Michael Boyd wrote the post and has a solid understanding of the financial world. His clear writing describes what is going on with CCO and the implications.

Don’t be thrown off by Boyd’s use of the word ‘Outdoors’ with an ‘s’ rather than singular, Outdoor, which is correct and accepted among those in the OOH Industry. It is a pet peeve of mine and an opportunity to mention.  It is his only flaw.  We’ll forgive the error, chalking it up to a misguided proof reader. Note: If someone uses ‘Outdoors’ with a ‘s’ and they say they are an expert on OOH, they’re typically not.

Boyd provides a summary at the start of his article, but read further. His details are insightful. For example, he discusses how CCO provides cash to keep iHeart afloat, paying their bills. When I first heard of this practice years ago, I was surprised. I have since seen it first hand several times. It is a common practice on the Ad Agency Buying Service side when the OOH Buying Service is part of another group.  Typically the OOH Buying Service plays the float, not paying OOH Providers for upwards to 120 and 150 days. OOH creates a lot of quick cash.

I hope you find Michael Boyd’s article informative.  Please share your comments.

 

by Michael Boyd
Long/short equity, contrarian, medium-term horizon, mid-cap 

 

Read full post by Boyd, click on ⇒ “Clear Channel Outdoors: iHeartMedia Bankruptcy Implications”

Summary

iHeartMedia has used Clear Channel Outdoors, which it controls, as its own personal piggybank for years.

The company’s bankruptcy likely means little recovery on the $1,051mm promissory note, but it at least puts a stop to raiding of the company for capital.

Clear Channel Outdoors is a great cash-generating business with high margins, but iHeartMedia has allowed the leverage to get out of control.

The equity is risky due to the variability in how creditors treat the company in bankruptcy. The bonds, however, should see full recovery under nearly any scenario.

 

 

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