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Lenders May Shove Clear Channel to Loan Default

The lenders that facilitated the complicated and ambitious Clear Channel buyout could be angling to take control of its equity.

The lenders plan to turn down a proposed debt exchange and deliberately force the companies into default, according to the Financial Times. Clear Channel proposed a swap of some parent company debt for Clear Channel Outdoor debt, but some of its largest creditors, including Apollo Management, Blackstone’s GSO, Centerbridge Partners, OakTree Capital and Wall Street firms, plan to refuse the swap in the hope that the company will violate its lending agreements and go into default.

Clear Channel’s revenue plunged 23% to $1.2 billion in the first quarter of this year, while cash flow plummeted 47%. The company is still accruing debt and has the potential of becoming the biggest default among media companies, according to Bishop Cheen, who follows corporate bonds for Wachovia. Clear Channel’s leveraged buyout was largest ever in the media business.

The Financial Times writes that it will take an agreement with lenders or a reversal of the current advertising slump to keep Clear Channel from defaulting.

A bankruptcy filing by Clear Channel Outdoor parent company could actually benefit the outdoor business, a Barclays Capital analyst says.