If radio giant Clear Channel Communications can’t restructure its debt in the next few years, it will likely collapse, sources told the Post.
And that is exactly what some of its large creditors want.
Clear Channel, the nation’s largest radio station owner — and which locally operates WKTU and Z-100 — has been unsuccessfully negotiating with some lenders to refinance its crippling debt, a source said.
“There have been various initiatives over the last month,” said a second source close to the situation.
It’s unclear whether the private-equity owners, Bain Capital and THL Partners, or Clear Channel’s creditors first initiated the discussions. A spokesman for Bain and THL said, “There have been no discussions” between the owners and creditors since they clashed in December.
Bain and THL bought Clear Channel in a $24 billion leveraged buyout in 2008. It may take about four years, but if the company can’t manage to change its capital structure, it will ultimately default on its $18.4 billion debt, sources said.
The market for refinancing loans is hotter than at any time since the recession, but that’s not helping Clear Channel, whose large creditors — Centerbridge Partners and OakTree Capital Management — are not passive LBO lenders.
Centerbridge co-founder Mark Gallogly is formerly a Blackstone Group managing director who cut his teeth buying media companies, and OakTree last week repossessed radio company Regent Communications. Both want to own Clear Channel and are prepared to wait, the first source said.
For months, there has been a war between Clear Channel and its creditors.
A group of lenders in December threatened to sue the company if it followed through with a plan to raise new debt at its Clear Channel Outdoor subsidiary in order to repay Clear Channel debt.
Clear Channel changed the terms of the loan so it did not need approval and raised $2.5 billion, allowing it to pay back enough of its loans to avoid a near-term default.
“I don’t think they will be able to get away with avoiding them twice,” a third source said.
Clear Channel generates $1.4 billion in cash flow while paying $1 billion in interest and spending $200 million on capital expenditures, a lender said. That means the company has just $200 million in annual free cash flow available.
The company has $700 million coming due in May 2011, and $4.5 billion due in July 2014. Nearly $2 billion of cash on hand should allow it to make it through 2011, but 2014 is another matter, sources said.
Jim Brady, a former sales director for Clear Channel in the Albany area who is now an independent ad buyer, said that in his area Clear Channel has cut costs too deeply to turn itself around. In 2006, he said, a 24-person sales team sold spots on its local stations, but now that task falls to six people.
In another move that was likely intended to save money, Clear Channel this year fired WGY morning talk-show host Al Roney, replacing him with syndicated talk show host Glenn Beck, even though Roney beat Beck in local ratings when Beck was on a rival station.
“Clear Channel may have come to a point where they don’t have enough people to make the stations profitable,” Brady said.