Clear Channel Winners & Losers

The Clear Channel saga headed into its final chapter at 11:11 last night, when the company announced that the financing dispute over its buyout had been resolved. Bain Capital and THL Capital will now pay $36 per share to acquire Clear Channel, as opposed to the standing $39.20 per share. In exchange, they will pay a higher interest rate on the debt. The deal will still take several more months to close, due to the need for a new stub equity election and shareholder vote. While we wait, a spot rundown of the winners and losers:

Winner: Bain Capital and THL Capital
We don’t yet have all the revised agreement details, but the share price slash and interest rate hike seem designed to offset each other. This means that the projected IRR should remain relatively constant. This is good news for the two firms, which both believe Clear Channel will end up being a big winner – a belief that was reinforced by the company’s strong Q1 financials. Moreover, Bain and THL don’t have to spend the next few months in court, locked in a battle with Wall Street firms they’ll ultimately have to reengage for future business.

Loser: Clear Channel shareholders
Yes they’re getting more than the stock would trade at sans buyout. But they voted in favor of a deal that has now been reneged on by both the sponsors and the lenders. This morning they should have the same complaint that Bain and THL were expressing over the past few months. What use is having a deal if one party doesn’t keep to it? I wouldn’t be surprised to see a class action attempt, although it would likely be fruitless.

Winner: Bain and THL limited partners
It’s the LPs, not the GPs, who would have born most of the legal and termination fee burdens. Some may still wish this deal didn’t exist, but is a better outcome if they trust their GPs’ judgment. If they don’t, then the real mistake was investing in the first place.

Loser: Me
I was told there would be a trial, and now all I’ve got is a press release and background briefings. It’s an empty feeling, and entirely inconsequential outside of the home office.

Incomplete: Lenders
I was tempted to call them losers, since this deal still looks better for the buyout firms than for the banks. Pretty sure that Citi, et. all still would have preferred to pay the breakup fee and move on. But no determination until we see what effect, if any, this settlement has on the pending buyout of BCE. If Clear Channel was the guinea pig, then BCE is the gorilla.