NEW YORK, Aug 9 (IFR) - Clear Channel Outdoor Holdings stepped out into the high-yield bond market last week for the first time since formally parting company with its former parent iHeartMedia earlier this year.
Outdoor advertising company CCOH approached investors with a US$1.26bn secured eight-year non-call three bond, which, along with a US$2bn term loan and cash on hand, will redeem just over US$3bn of unsecured debt maturing in 2020 and 2022 with coupons of 6.5% and 8.75%, according to investors.
The new bond was expected to price on Friday and appeared to be gaining decent traction after bookrunners JP Morgan and Morgan Stanley tightened pricing from the 5.5% area to 5.25%-5.5%.
Holders of the existing bonds like the deal, as they can swap unsecured debt trading at a relatively high dollar price for secured paper that will be priced closer to par.
The senior secured bond is backed by a first priority lien on most of the company's assets and those of its guarantors.
Even so, investors are being offered lower-yielding paper and there has been some price sensitivity around talk.
"We like the industry and the business, but will not play if it comes too tight," said one investor. "It is about pricing expectations, not whether we like the name ... and I think they will try to squeeze it."
Ratings agencies largely see the refinancing as credit positive with S&P earlier this month raising CCOH's credit rating to B- from CCC+ as the transaction will reduce interest expense and extend maturities.
Fitch said last week that it "views positively the company's proactive efforts to manage the balance sheet and improve the company's financial profile as it operates as a standalone company".
CCOH is also using the US$350m raised in a recent stock sale to pay down costly debt, and Fitch expects Clear Channel's annual cash interest burden to drop by about US$30m and leverage to fall to around 8.5x from 9x.
CCOH is seen benefiting from being one of the world's largest outdoor advertising companies with diverse operations and a business that is somewhat insulated from the competitive pressures elsewhere in the media sector.
"It is a company people have known for a long time and you are covered with these types of (secured) bonds," said a second investor.
It can also now focus on growth instead of providing liquidity to its former parent company, which had resulted in several years of negative free cashflow.
Nevertheless, management still has some heavy lifting ahead as it tries to reduce leverage.
While S&P thinks free operating cashflow will turn positive by the end of 2020, it thinks it will be difficult to cut its debt load materially over the next two years.