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Clear Channel Seeks to Buy Time With $2.1 Billion Bond Exchange

Clear Channel Communications Inc. (CCMO), seeking to address more than $10.1 billion of debt due in 2016 before interest rates reverse, is offering to exchange $2.1 billion of notes for debt that matures in 2021.

The radio and outdoor advertising company will exchange $796.3 million of 10.75 percent notes due 2016 and $1.28 billion of 11 percent so-called toggle payment-in-kind notes due 2016 for the new debt, according to a Clear Channel statement today. The notes will pay 12 percent in cash and 2 percent through the issuance of payment-in-kind notes, said the company, which set a June 18 offer deadline.

Free cash flow at the San Antonio-based broadcaster hasn’t exceeded $340.9 million in any year since its 2008 buyout by Bain Capital Partners LLC and Thomas H. Lee Partners LP. Credit-default swaps tied to the bonds of the company, which owes about $20.8 billion total, are at about the lowest in two years, a sign investors are open to refinancing, Bloomberg data show.

Speculative-grade borrowers, rated below Baa3 at Moody’s Investors Service and lower than BBB- at Standard & Poor’s, have already raised $178.3 billion selling bonds in the U.S. this year, more than the $137.3 billion issued by this time in 2012, when a record $358.9 billion of the debt was sold, Bloomberg data show.

Swaps Plunge

Clear Channel’s 10.75 senior unsecured bonds climbed 4 cents to 101.5 cents on the dollar to yield 10.2 percent as of 2:02 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.

Default swaps tied to Clear Channel dropped to 19.3 percent upfront yesterday, according to data provider CMA, which is owned by McGraw Hill Financial Inc. and compiles prices quoted by dealers in the privately negotiated market. That means investors would pay $1.93 million initially and $500,000 annually to protect $10 million of the company’s debt from losses for five years.

The contracts, which typically fall as investor confidence improves, are at the lowest since June 2011, CMA data show.

Payment-in-kind, or PIK, notes allow borrowers to toggle between paying interest in cash or with more debt. The PIK bonds that Clear Channel is offering to exchange includes debt that the company or its subsidiaries hold themselves.

To contact the reporter on this story: Mary Childs in New York at mchilds5@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

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