Clear Channel Outdoor Holdings Sells Investment and Takes ‘Additional Actions’
Furloughs, Freezes and Variable Compensation Reductions
Clear Channel Outdoor Holdings, Inc. to Sell Investment in Clear Media Limited
Here is a release from Clear Channel Outdoor Holdings provided yesterday.
Takes Additional Actions to Increase Liquidity and Preserve Financial Flexibility
I have a lot of great pals at the market and mid management levels of CCO and it breaks my brain to hear this news coming out of their company. These folks are hard working and brilliant media people and yes, strong OOH professionals. I respect the hell out of most of them.
Let’s try to get this straight, I am not a finance guy but I know OOH, (how to sell it, how to buy an OOH plant, manage a market and sell the assets) (Oh for the record, all the aforementioned at a significant profit) and the narrative is a little sketchy.
So CCO sells off its China operation called Clear Media Limited for $253 million, after earlier last week ‘drew down’ on revolving credit $150 million. So after the commissions, fees and costs to sell the ‘China asset’ the sale will just about cancel out the credit move? OK, more than cancel out.
Wouldn’t the ideal way to manage, is to sell the space and not sell the assets? Are wheels spinning?
I guess I have to give way to the financial geniuses to figure it out and explain. Must be really difficult rocket science stuff.
Here is the tough news
The below is from the recently released press information.
Financial and Liquidity Update
In light of the rapidly-evolving impact of COVID-19, the Company is implementing and evaluating actions to strengthen its financial position and support the continuity of its platform and operations.
The Company believes the anticipated net proceeds from the sale of Clear Media combined with the cash on hand, including the $150 million recently drawn from the Revolving Credit Facility, and the initiatives the Company is actively pursuing will improve its liquidity position and provide the Company with additional financial flexibility during the economic downturn.
These initiatives include but are not limited to:
- Identifying opportunities to significantly reduce annual capital expenditures.
- Discretionary growth capex can be largely deferred.
- Maintenance capex can be deferred to the extent possible.
- Exploring deferral options with respect to committed capex.
- Continuing discussions with landlords to align fixed site lease expenses with revenue during the economic downturn.
- Beginning to achieve success in both Europe and the U.S.
- Reducing employee compensation expense.
- Temporary salary reductions including 30% reductions for both the Company’s Worldwide CEO, William Eccleshare and Americas CEO, Scott Wells;
- Furloughs based on market conditions, hiring freezes and variable compensation reductions.
- Aggressively cutting discretionary spending.
However, given the quickly evolving economic environment, continuing downward pressure we are currently seeing in Europe and beginning to see in the U.S., and the uncertainty around how long the economic downturn and its impact on our business will last, the Company is withdrawing its guidance for 2020, previously provided on February 27, 2020. As a reminder, the Company’s next material debt maturity is 2024 when the Company’s $1.9 billion in 9.25% Senior Notes are due.
OOH Today’s rough interpretive explanation:
No new builds.
Maintenance is deferred, which makes you really want to place your brand on their displays.
Cancel (or try to) existing Cap Ex deals.
Reduce lease costs –risk losing locations or cripple your future even more.
Reduce employee expense including 30% reductions for Wells and Eccleshare. (How about no salary for those two until things turn around and leave the people at the plants entirely whole? Read on, that’s not going to happen)
Furloughs, freezes and variable compensation reductions (cut commissions, that’s really motivating the team)
Cut discretionary spending (these type of cuts are always at the plant market level where they hurt the most and the ones delivering revenues)
Not surprising, as was the case in the dot com days, the companies who were not flourishing, when everyone else around them were enjoying robust revenues, those were the companies who made the first employee cuts and unfortunately experienced even darker days. There was no magic pill for success then. There is none for today either.
Even if we were to find a solution to the coronavirus pandemic tomorrow, the fact that companies who were not enjoying an extended period of robust sales prior to, is a relatively strong indicator of future outcome. The COVID-19 economy merely accelerates the time line.
We sure don’t like reporting this kind of information. Tough times are on us. We wish everyone, companies and recently ‘furloughed, frozen and variable compensated reduced employees’, well.
My brain is about to explode.
This is unfortunate- I have many friends there. They have amazing assets. Some of the best in the world and as well as in my back yard in the Tampa Market.
I think they should have reinvented themselves when they separated from iheart, like Outfront did when they separated from CBS.
A fresh start brings new interest and new life. Outfront is a great example of that. The Clear Channel name to the majority of the media world is associated with “radio”… I wish them the best! A comeback story would be awesome- @William Board
Reducing leases is tough, no doubt. Do you see more bad than good in putting a microscope on leases that are under performing or are expected to be as we forge ahead into this unknown?
Thank you for the question. Placing individual leases under a microscope is typically not a good thing. What ever actions if any occurs with leases, determination of its value should be at the market level by the individuals who actually know the asset. Actual local market evaluation must be the guidance verses an arbitrary corporate formula mandating status of the assets value.
Good points Andrea. Thank you
I own a property that leases to a BIG 3 (OOHToday removed the name of the company sign). Their annual payment was due at the end of March. They are trying to renegotiate the lease or they might leave. Seems like a big cost to move it. Both sides are leased out and I have confirmed that one side only got a 28 day deferral. Should I stand my ground and hold out or do I need to hire an attorney?
This is always a tough call. Sounds like you did some homework in checking on the revenues.
Further research recommendations, is the location rebuild-able should the Big 3 remove the structure?
It is expensive to move it or take it down. That is the last alternative for both parties. How badly do you need the income they provide?
What is the ratio of the lease payments against the revenue? Are there other signs in the area. There are many more considerations.
Understanding rate and occupancy is important in your negotiations. We do NOT recommend an attorney to negotiate. There are very few qualified attorneys in this area of the law and you do not want them to learn on your nickle. We are happy to recommend professionals for assistance.
Have you approached any of the OOH competitors in or near the market for their assistance? They should be very helpful.
You must understand the value of the structure to the OOH Big 3 provider to determine what their risk tolerance is.
In more cases than not, the Big 3 OOH provider wants to make a deal. But do not give it away. This crisis is short term and the Big 3 owner’s mismanagement by not having cash on hand to cover a short term crisis is their problem not yours. Get the money. If you would like to speak further please contact me directly at BillBoard@OOHToday.com or 202 840 3901.
Thank you for the valuable information. We pushed back and asked for evidence that they suffered a financial loss from the sign that sits on our property. They said–thank you for your consideration….and then recieved a check for the full amount a week later!!!