The Looming Meltdown at Clear Channel Communications

The era of heavily-leveraged buyouts has quickly gone bye-bye, and Clear Channel Communications could become a serious casualty.

last week, the New York Post pointed to a quickly-deteriorating financial situation at Clear Channel, and sources to Digital Music News have been telling a similar tale.

The radio and billboard conglomerate was recently purchased for nearly $27 billion, though leveraged buyers Thomas H. Lee Partners and Bain Capital are now holding a very smelly bag.  At present, Clear Channel is now considering a plan with senior lenders to swap debt for assets, according to the Post.  Or, in another scenario, the company would enter a structured bankruptcy.

A difficult advertising downturn is exacerbating this situation, and broader economic malaise is also souring the bet.  “This was one of the last LBOs [leveraged buyouts] to get done before everything imploded, and [Thomas H.] Lee and Bain were trying to get out of it,” one source told Digital Music News over the weekend.  But the partners were forced to stay-the-course under serious legal threats, almost a forced march into the current turmoil.

As the discussions continue, Clear Channel is burning cash.  Meanwhile, other media plays are also on the watch list.  That includes EMI Music, also a heavily-leveraged buyout that has generated serious losses for Terra Firma.