Is Clear Channel's $2.5 Billion Upsized Bond Offering An Event Of Default?

Yesterday CCU surprised the bond world by upsizing its $750 million bond offering, which Zero Hedge highlighted previously as an indication of the top-tick exuberance in the bond market, to $2.5 billion. And according to preliminary rumors it may very well have been the top, with Thomson Reuters' IFR service saying that "counsel for certain lenders has delivered a letter asserting that the transaction and the UOP was an event of default under the CCU Credit Agreement." This is not good for CCU, which had hoped it had sufficiently placated dissident bondholders when it dramatically changed the use of proceeds of the upsized transaction.

As a reminder the original deal was supposed to use offering proceeds to pay down a portion of the 2010 intercompany note, and using the rest for general corporate purposes. The revised deal contemplates using new capital to pay a $500 million dividend to Clear Channel Outdoor shareholders (gee, another dividend recap to sponsors: only 10% of CCO is held by the public, the balance is owned by CCU, which in turn is one of THL and Bain's worst LBOs ever), repay a portion of said interco note, and using about $2 billion for par repayment of bank debt. At least term loan holders are happy.

However any recap that makes TLs and equity happy, usually by definition, leaves the bondholders quite angry. Which may explain today's legal action. If the proposed default is found to have merit, look for a prompt cease and desist order issued to underwriters Goldman, Citi, CS, DB and Morgan Stanley, which would unwind not only the deal, but move CCU's CDS violently, which at 1,200 bps makes no sense, especially with the CCOH deal coming in at 9.25%.

And while CCU CDS has tightened to ridiculous levels, as the chart below indicates, the firm's 3s5s curve is about as steep as it has ever been, highlighting that no real deleveraging at all has occured in the name, but merely more of the same old extend and pretend shennanigans.

Comments

[Rainman]

HAHA......lot's of funnies in this jacked up bond offering. But the real knee-slapper is the half billion payout of dividends to CCO shareholders....er, sponsors.

Give the boyz an A+ for balls made of steel. A cat can't scratch 'em. 

[Oso]

Love this.  what WILL they come up with next - i cant wait to find out!! the laughs never stop.  Comedy cent - i mean, US equity markets - Two thumbs up rave critics.

[Anonymous]

You see, they're pretty much right to do this now because right now the Fed is providing unlimited liquidity/cash injection to any organization at all that serves some kind of control purpose for the PTB/NWO/CFR/Club of rome.

Now likely in a few years all wells run dry and no such acquire event of mad money will be able to be made.

Now is the time to go for broke, get as much as you can and spend it wildly before the final meltdown.

I hear Cessna is heavily discounting a whole bunch of prebuilt bidness jets.

-MobBarles

[MarketTruth]

Maybe these 'investment' banksters need to start a new Illegal Drug Money Laundering (IDML for short) CDS or some such. CNBC's you-know-who could go long cocaine futures, his personal stimulus package alone would assure quarterly profits. ;)

Think new and innovative ways of investing... that Larry Summers might suggest Harvard buy in to these new IDMLs.

[The Axe]

Is this deal like Fozie jumping the shark ?  How could the common be up so much?  Is Mikey Milken doing this deal?  Scotty beam me up, I can't understand the financial market>>>

[Anonymous]

CCO 8k: "to facilitate the repayment of the then-outstanding balance on the CCOH intercompany note to CCU with a corresponding repayment of term loans under the CCU senior secured cash flow credit facilities (the “CCU Credit Agreement”) at par."

Where did you find out about the $500m dividend?

[bugs_]

Wow.  Grab now 2010 is going to be tough.

[isolinx]

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