Clear Channel Outdoor Holdings, Inc. Announces Clear Channel International B.V.'s New Term Loan Facility and Concurrent Redemption of Existing Secured Notes

Rhea-AI Summary

Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) announced a new term loan facility for its subsidiary, Clear Channel International B.V. The facility, totaling $375.0 million, consists of fixed and floating rate term loans, with JPMorgan Chase Bank, N.A. and J.P. Morgan SE as key agents. CCIBV used the loan proceeds to redeem its outstanding senior secured notes due 2025.

Financial Analyst

The new credit agreement by Clear Channel International B.V. (CCIBV), a subsidiary of Clear Channel Outdoor Holdings, Inc., is a significant financial maneuver that merits attention. With a substantial principal amount of $375 million split into fixed and floating rate tranches, the structure of the debt showcases a strategic approach to capital management. The fixed rate tranche carries a 7.5% interest, which is relatively high in the current market, indicating a potentially conservative stance by the lenders given the risk profile of the advertising sector, particularly for outdoor advertising which can be cyclical and sensitive to economic downturns.

The choice of a floating rate tranche tied to Term SOFR plus 2.25% suggests flexibility in the face of interest rate volatility, allowing CCIBV to benefit from potential decreases in benchmark rates while protecting lenders with a 5.25% floor. This could be a strategic hedge against rate fluctuations. The lack of amortization payments until maturity provides CCIBV with liquidity relief, which could be critical for operational investments or weathering short-term market shifts. However, investors should be mindful of the balloon payment risk at maturity, which could pressure the company's cash flow in 2027 unless refinanced or managed with free cash flow generation.

Debt Market Analyst

CCIBV's redemption of its 6.625% senior secured notes due 2025 using the new term loan facility is a refinancing move that could be seen as a proactive measure to manage its debt profile and potentially lower its cost of capital. The timing of this action, ahead of the notes' maturity, suggests a strategic initiative to take advantage of current market conditions. The absence of scheduled amortization payments prior to the maturity date in 2027 provides CCIBV with the flexibility to manage its cash flow more effectively, which could be a positive signal to debt investors about the company's liquidity management.

However, the make-whole premium and step-down provisions indicate a cost to early repayment, which could deter CCIBV from capitalizing on future favorable debt market conditions should they arise before the specified dates. The ability to prepay at par post the third anniversary without a premium offers a future opportunity for debt restructuring, which could be a point of interest for bondholders and credit analysts monitoring the company's long-term financial strategy.

Market Research Analyst

The advertising industry, particularly the outdoor segment in which Clear Channel operates, is undergoing transformation with the advent of digital media and changing consumer behaviors. CCIBV's financial restructuring through this new term loan facility could be an indication of the company's intent to invest in digital infrastructure or to pivot its business model to stay competitive. The use of proceeds to redeem higher-interest debt suggests a focus on optimizing capital structure to potentially improve profitability and shareholder returns.

However, the advertising market is notoriously volatile and the company's financial commitments must be weighed against the backdrop of industry trends, such as ad spending patterns and technological disruptions. The terms of the loan facility, including the covenants and obligations, will likely influence CCIBV's operational flexibility. Stakeholders should consider how these financial decisions align with the company's strategic growth initiatives and the broader industry landscape, which is important for evaluating the long-term sustainability of CCIBV's business model.

SAN ANTONIO, March 25, 2024 /PRNewswire/ -- Clear Channel Outdoor Holdings, Inc. (NYSE: CCO) (the "Company") announced today that the Company's indirect, wholly owned subsidiary, Clear Channel International B.V. ("CCIBV"), entered into a credit agreement (the "CCIBV Credit Agreement") on March 22, 2024 (the "Closing Date") governing CCIBV's new term loan facility (the "CCIBV Term Loan Facility"). Under the agreement, JPMorgan Chase Bank, N.A. serves as administrative agent and collateral agent, and J.P. Morgan SE serves as lead arranger and bookrunner.

The CCIBV Term Loan Facility is comprised of two tranches of term loans (the "Term Loans"), totaling an aggregate principal amount of $375.0 million: (1) a "fixed rate" tranche of term loans in an aggregate principal amount of $300.0 million (the "Fixed Rate Term Loan Tranche"), bearing interest at a fixed rate of 7.5% per annum; and (2) a "floating rate" tranche of term loans in an aggregate principal amount of $75.0 million (the "Floating Rate Term Loan Tranche"), bearing interest at a floating rate equal to the benchmark rate "Term SOFR" plus 2.25% per annum (subject to a floor rate of 5.25% per annum). The CCIBV Term Loan Facility matures on April 1, 2027 (the "Maturity Date") and has no scheduled amortization payments prior to the Maturity Date.

The CCIBV Credit Agreement, among other covenants and obligations, requires CCIBV to make certain mandatory prepayments, subject to certain requirements and exceptions, and permits CCIBV to make voluntary prepayments at its discretion. Any principal payments in respect of the Term Loans made in connection with certain asset sales, a "change of control" (or a sale of all or substantially all of CCIBV's assets) or a similar transformative transaction may be prepaid at par and will not be subject to any premium.

Otherwise, generally, prior to the first anniversary of the Closing Date, principal payments in respect of the Term Loans will be subject to a customary make-whole premium and, thereafter, a customary step-down until the third anniversary of the Closing Date, after which the Term Loans may be prepaid at par and will not be subject to any premium.

CCIBV used the proceeds of the CCIBV Term Loan Facility, together with cash on-hand, to redeem all of its outstanding 6.625% senior secured notes due 2025 with an aggregate principal amount of $375.0 million and to pay certain related transaction fees and expenses.

Additional information on the CCIBV Term Loan Facility and the form of credit agreement related thereto is available in a Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission.

About Clear Channel Outdoor Holdings

The Company is at the forefront of driving innovation in the out-of-home advertising industry. The Company's dynamic advertising platform is broadening the pool of advertisers using its medium through the expansion of digital billboards and displays and the integration of data analytics and programmatic capabilities that deliver measurable campaigns that are simpler to buy. By leveraging the scale, reach and flexibility of its diverse portfolio of assets, the Company connects advertisers with millions of consumers every month across more than 330,000 print and digital displays in 19 countries, excluding countries held for sale.

Cautionary Statement Concerning Forward-Looking Statements

Certain statements in this release constitute "forward-looking statements," including within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, as amended. These forward-looking statements include, but are not limited to, all statements other than those made solely with respect to historical facts and include, but are not limited to, statements related to the CCIBV Term Loan Facility. The words "will," "believe," "expect," "anticipate," "continue," "look forward to," "well-positioned to," "remains," "further," "estimate," "forecast," "goals," "targets" and similar words and expressions are intended to identify such forward-looking statements. In addition, numerous risks, uncertainties and other factors may cause actual results to differ materially from those expressed in any forward-looking statements. These risks, uncertainties and other factors include, but are not limited to, whether the consummation of any asset sales and the timing and use of proceeds related thereto. Many of the factors that will determine the outcome of the subject matter of this press release are beyond the Company's ability to control or predict. The Company undertakes no obligation to revise or update any forward-looking statements, or to make any other forward-looking statements, whether as a result of new information, future events or otherwise.

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SOURCE Clear Channel Outdoor Holdings, Inc.

What is the total principal amount of the CCIBV Term Loan Facility?

The CCIBV Term Loan Facility totals $375.0 million.

Who serves as the administrative agent for the CCIBV Term Loan Facility?

JPMorgan Chase Bank, N.A. serves as the administrative agent for the CCIBV Term Loan Facility.

What are the two tranches of term loans under the CCIBV Term Loan Facility?

The two tranches are a fixed rate tranche of $300.0 million and a floating rate tranche of $75.0 million.

What is the interest rate for the fixed rate term loans?

The fixed rate term loans bear interest at a rate of 7.5% per annum.

How does the floating rate term loans' interest rate work?

The floating rate term loans' interest rate is based on the benchmark rate 'Term SOFR' plus 2.25% per annum, with a floor rate of 5.25% per annum.