The ratings agency upgraded Clear Channel’s bank credit facilities to Caa1 from Caa2 and its speculative grade liquidity rating to SGL-2 from SGL-4. THL Partners and Bain Capital acquired the company in the midst of the buyout boom for $27 billion, saddling it with $18 billion in debt and contributing to its current 9.5x leverage ratio. If Clear Channel had filed for bankruptcy, it would dwarf last year’s largest PE-backed bust. With $5.25 billion in debt, Colony Capital’s failed $8.9 billion deal for Station Casinos looked like chump change compared to Clear Channel. Yes, we saw some big boom-era buyouts crumble into bankruptcy last year (Aleris, Masonite), but this would be the first true mega-buyout bankruptcy, and the fallout, both within the company, and for the private equity industry, would be massive.
Over the past year, Clear Channel has struggled to refinance its debt while its mega-buyout peers like Harrah’s (Apollo Management and TPG) and First Data (KKR), pushed amendments and exchanges through with more success. But recently Clear Channel found some luck; the company recently refinanced a $2.5 billion loan to Clear Channel Outdoor and issued new senior notes at Clear Channel Worldwide holdings, which allowed the company to pay down $2 billion in debt.
Moody’s said the company’s current debt level is unsustainable in the intermediate-term, but recovery levels will improve “as cyclical pressures subside” and Ebitda increases. “Additional distressed exchanges of bonds, essentially a continuing gradual restructuring, are probable, particularly for the notes maturing beyond 2013,” wrote Neil Begley, a Moody’s Senior Vice President.