Report: Clear Channel Gambles On Wrestling Its Debt

Bob Pittman

Bob Pittman’s challenge is to persuade advertisers not only that radio can withstand the digital competition, but that they should pay more to reach its listeners, according to an article at ft.com.

According to Nielsen, the ratings group, radio can generate a sales lift of $6 for every ad dollar spent. Yet radio pricing is a third cheaper than television, Pittman says.

The endurance of car radios means “we’re the only company in America that loves traffic jams”, he says, and with an audience already accustomed to consuming its content on the move, he argues that the more mobile digital media becomes, the more it plays to Clear Channel’s strengths.

If he is making progress it is appearing only slowly. Its radio revenue was up just 4 per cent in 2013, adjusting for political ad cycles. Just over half of group revenue comes from radio with the rest from a more stable multinational billboard business, Clear Channel Outdoor, which is listed with a market capitalisation of $3bn.

Richard Bressler

Pittman expects growth to accelerate, but even more important to averting bankruptcy has been a series of debt restructurings that have taken advantage of yield-hungry capital markets to push back a looming wall of maturities.

In April, an $850m refinancing pushed repayments back from 2014 and 2015 to 2018. However, it came with 10 per cent interest rate, double the rate on the debt it replaced. Clear Channel’s expected interest expense of about $1.6bn in 2014 is about equal to its free cash flow.

“Six months ago, if you’d have told me I could refinance $850m of subordinated debt at 10 per cent, I’d have looked at you like you were crazy,” says Richard Bressler, a Thomas H Lee partner who became Clear Channel’s chief financial officer last year. The demand for its debt is a sign of confidence, he says.

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