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Report: Clear Channel "Burning Cash" To Delay Debt Issues
December 2, 2013

Clear Channel is reportedly offering double interest to push out maturities on some of its $4.3 billion worth of debt, according to Bloomberg, which adds that CC has its first cash flow deficit in four years. CC announced last week that it plans to extend $1.8 billion in borrowings that are due in 2016 by three to five years. Fitch Ratings says this move would boost the company's interest costs to as much as $55 million per year.

Bloomberg notes that this plan gives Clear Channel more time to turn its finances around, and that the company has posted losses every year since the massive 2008 Bain Capital and Thomas H. Lee deal to acquire the broadcaster. However, the plan could also increase CC's risk of missing interest payments on $20.7 billion worth of its debts.

Moody's Senior Analyst Scott Van de Bosch told Bloomberg, "Refinancing at a higher rate is never a positive. It’s not a cure-all, but it buys them time to improve the balance sheet."

Clear Channel’s interest expenses have surpassed its operating income in every quarter since the end of 2008, according to Bloomberg's data, and its EBITDA (earnings before interest, taxes, depreciation and amortization) have fallen to $1.8 billion in the 12 months that ended June 30, 2013 from $2.3 billion in 2007.

"Ultimately, they need to grow EBITDA and generate free cash flow to repay debt to delever the balance sheet, which will increase the opportunities to sell assets to repay additional debt," Van den Bosch said.

Roughly half of Clear Channel’s sales come from CCM+E radio stations and Premiere Networks, according to a SEC filing from February.

"Its broadcast radio business is heavily sensitive to economic trends," Van den Bosch commented. "During a downturn, advertisers are more likely to cut back on broadcast and the secular risks to broadcast radio are more likely to manifest themselves then."

The full article can be found here.

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