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High-level discussions are underway between Clear Channel’s private equity sponsors and their financiers as to whether room exists to change terms of the financing, two sources close to the situation told dealReporter.
However, buyers Bain Capital and Thomas H Lee still see incentive in closing the deal this quarter despite current market turbulence, the first source said.
While a wholesale restructuring of the financing is not in the cards, the first source said the sponsors have indicated to the financing sources they are open to talking about “tweaks” to make the bonds more saleable or the bank debt more easily swallowed. “I’d be naive to think there won’t be some changes, which ones I don’t know…a change in quantum or something like that, no,” the first source added.
The second source, close to the buyside, agreed saying the only thing to be done at this point is to attach more attractive features to the overall debt structure and perhaps adjust a portion of the subordinated debt.
Additionally, mentioned the first source, unlike most other LBOs, Clear Channel’s use of stub equity in the transaction complicates financing term negotiating room. Having the outstanding public stub creates disclosure issues other deals would not have in terms of people electing to take equity predicated on a certain financing structure, he said, adding there are financial models people on the equity side bought into that if they change too much, it would create other problems.
The debt portion of the deal is being funded with the following as per proxy filings: USD 16.375bn with senior secured credit facilities; USD 1bn secured with a receivables-backed revolving credit facility; USD 2.6bn funded with a senior unsecured bridge loan facility and USD 1.5 funded by a senior subordinated unsecured bridge loan facility.
As for progress on the regulatory front for the deal, the first source said significant progress had been made at the DoJ and FCC which would also point to a likely Q1 closing date. The second source clarified equity partners have been told to aim for a January-end closing date as the FCC has indicated to deal lawyers that the main aspects of the approval process have been satisfied and that “it is all paperwork at this point”.
The first source, not directly involved on Clear Channel’s planned USD 1.2bn TV station asset sale to Providence equity, did say while the PE orally notified CCU about concerns over valuation, he heard it had yet to put its intentions regarding a possible walk-out on the deal in writing. Therefore, regulatory paperwork for CCU’s LBO still assumes Providence is the intended buyer for 56 TV stations, he said.
“Overall, it seems like a very progressive situation with all the pieces coming together now,” the second source said.
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