Posted by chicagomedia.org on June 29, 2009 at 11:02:12:
Is the bell tolling for Clear Channel?
David Hendricks | San Antonio Express-News
Web Posted: 06/27/2009 12:00 CDT
The signal from Clear Channel Communication Inc.'s radio empire may be fading out.
When holding company CC Media Holdings Inc. announced early this month it wanted to reposition debt between its radio and billboard units, lenders for last year's massive private equity acquisition of Clear Channel signaled their intention to block the move.
The lenders evidently want to steer the company into bankruptcy so they can pick up the assets cheap and sell them. The lenders apparently believe that is the way to get the most amount of money back from the loans made when Boston-based firms Bain Capital Partners and THL Partners acquired the San Antonio company in one of the last big private equity deals as the credit crunch worsened.
The lenders are getting even. They didn't want to finance the deal last year as the U.S. recession worsened. But the lenders had signed commitments in 2006. They tried to back out of making the loans but lost a lawsuit.
Analysts believe Clear Channel, now with about $22 billion in total debts, will have trouble making scheduled payments later this year. The company, already down to about 800 stations from its peak of about 1,200 stations, either will have to start selling stations itself or go into bankruptcy, where lenders will put stations up for sale.
"Unfortunately for Clear Channel, there will be no government intervention to speed up bankruptcy proceedings," an article on Seeking Alpha's Internet site recently observed.
With slumping advertising revenues, a $428 million first-quarter loss and little prospect for refinancing its debt, no one sees a way out for CC Media and its Boston owners. "It's a perfect storm," said author and radio industry forecaster Alec Foege, who last year published a book about Clear Channel's radio industry dominance, "Right of the Dial."
"The financial moves by Clear Channel were aimed at enriching the executive team at the expense of the shareholders," Foege said of last year's acquisition. "There's still financial acumen at the company, but it doesn't extend to solving its financial problems in terms of marketing its core product."
Foege said several radio companies would be happy to bid on Clear Channel radio stations, especially those in large cities, if they go up for sale. He listed CBS Radio (formerly Infinity Radio Inc.), Citadel Broadcasting Inc. and Emmis Communications.
Although the industry is losing listeners, "radio is not headed for extinction," Foege said. "Advertising will return at some point. Radio offers value, even compared to the Internet. The Internet doesn't yet serve local markets as well as radio ... Free commercial radio is still compelling. It's hard to argue with free. There are still listeners, and advertisers realize this."
The industry could lose its leader. "Clear Channel has had a big influence on its competitors," Foege observed. "If something worked, their competitors tried it as well. It's been the bellwether for the radio industry as a whole."
Clear Channel has long been one of San Antonio's most influential companies, especially in market reach. As the months pass, remaining so falls increasingly into doubt.