Clear Channel Investors Overestimate LBO Failure Risk

Investors in the credit derivatives of radio broadcaster Clear Channel Communications Inc. are overestimating the chances its buyout will fail, according to a report by Moody's Credit Strategy Group.

Credit default swaps on San Antonio-based Clear Channel have dropped 324 basis points to 755 in the past week, CMA Datavision prices show, suggesting the deal has a 75 percent chance of failure, Moody's said. A fair value based on the deal's chance of success is 940, Moody's said. The swap prices are expected to rise if the deal goes through because that will leave Clear Channel with at least $22 billion in debt.