Seems Clear Channel Outdoor have listened to Legion Partners, it’s 5th largest shareholder, and hastened the sale of more European country assets to reduce debt. Spanish & Italian companies have been sold to JCDecaux for a combined €75.1m, subject to regulatory approval in Spain.
In a press release dated May 30th Clear Channel Outdoor stated, “The Company intends to use the anticipated net proceeds from the sale, after payment of transaction related fees and expenses, to improve its liquidity position…”
Earlier, in its 2022 Full Year Annual Report, Page 50, the company revealed;
“We anticipate having cash interest payments of $413.0m in 2023 and $398.5m in 2024, assuming we do not refinance or incur additional debt. The expected increase from cash interest paid in 2022 (of $341.4m) is driven by the effect of higher variable interest rates on our Term Loan Facility”.
Together with proceeds from an earlier sale of its Swiss business, for a reported $92.7m, top line sale proceeds of the 3 European country businesses sold to date, amount to $167.8m. This equates to circa 40.6% of its anticipated 2023 cash interest liability on its long term debt.
I anticipate more or all non-US assets to be sold imminently in an attempt to meet the ongoing interest liabilities on its principal total long term debt mountain of $5,568bn (as at Year End 2022).
But after a decade and more of historically low interest rates since the 2006 financial crash, and the $17.9bn leverage takeover of the then combined #Radio and #OOH company in 2008 by private equity companies Bain Capital and Thomas H Lee partners, it looks like the Clear Channel Outdoor Board have seemingly been unwilling or unable to fix the metaphorical leaking roof whilst the sun was shining by making no meaningful attempts to reduce its principal long term debt pile.
Between Year Ends 2021 and 2022, the total principal debt amount was reduced by only $15m whilst incurring cash interest payments of $341.4m over the same period.
But now we’re in a different era, a period of unprecedented global economic and geopolitical uncertainty. Marked by rising inflation and interest rates. The US Federal Reserve maintained interest rates at 0.5% to 1.5%, from December 2008 to December 2017, then cut them to 0.5%, effectively zero, to stimulate growth in the pandemic era. Since March 2022, and the Russian invasion of Ukraine, interest rates have been raised seven times to 4.5%.
I fear #ClearChannelOutdoor are too exposed to survive this epoch.
Warren Buffett, Chairman and CEO of $712bn Berkshire Hathaway Inc, unknowingly summarized their predicament better than I ever could; “Only when the tide goes out do you discover who’s been swimming naked”