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View Diary: Moody's Assigns "Very High Credit Risk" Tag to Rush Limbaugh's Parent Company Clear Channel (70 comments)

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  •  Clear Channels Balance sheet reads Bankruptcy (16+ / 0-)

    all over it. I'm amazed the rating agencies didn't give the debt offering the same rating they did Guitar Center's : "Business model is not sustainable".

    Clear Channel's Balance sheet is much worse than Guitar Center (Bain Capital). Guitar center had 100 Million in equity holding up 1.56 Billion in debt. Clear Channel has a negative net worth close to 20 Billion.

    That has bankruptcy all over it. You also have a dying business model too.

    Obviously this started before the Flush Rush campaign, but losing all their advertisers for their main attraction should have caused the ratings agency pause not to rate this offering.

    “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

    by Dburn on Mon May 13, 2013 at 06:18:41 AM PDT

    •  can't even find the symbol (2+ / 0-)
      Recommended by:
      elwior, BillyElliott

      they listed?

    •  Great Point you should post an article (1+ / 0-)
      Recommended by:
      elwior

      maybe find a few more examples of companies that were better off than ClearChannel getting worse loans.

    •  I just glanced at the latest 10-Q quarterly report (7+ / 0-)

      Here is their March 31 balance sheet in brief (all amounts in billions):

      Current Assets  2.4
      Property, Equipment & Other Assets  3.8
      Licenses & Permits  3.5
      Other Intangibles  1.7
      Goodwill  4.2

      Total Assets  15.5

      Current Liabilities  1.3
      Long-term Debt  20.4
      Deferred Taxes & Other Long-term Debt  2.1

      Total Liabilities  23.7

      Net Equity (Deficit)  -8.2

      If you toss out the goodwill, which I'm guessing would have little value in a liquidation, then the book value of their debt is twice the size of the book value of their assets.  Their current assets are almost twice their current liabilities; so presumably they can continue to operate for the next year or so.  I have no idea what the market values of the towers, transmission equipment, studios, frequency licenses, etc are.

      Because radio licenses are limited in number, they do have considerable value; however, as Dburn and others have alluded to, radio's future in general is questionable at best.  So I suppose it could be that the market value of the licenses and permits may be less than book value; it depends on when they were purchased and booked.  Some may be undervalued and some overvalued.

      Still, when considered in light of a first quarter loss of over 200 million,  it's not a balance sheet that inspires confidence.

      ______________
      Love one another

      by davehouck on Mon May 13, 2013 at 07:39:33 AM PDT

      [ Parent ]

      •  Then maybe this bond/loan thingy is the (7+ / 0-)

        Bain Capitol Loan Of Death that we hear about. They can use it to pay off the bain vampires and then sell off what is left of the assets and screw the employees. limbaugh will get his of course and start up an internet empire like beck did.

        That passed by; this can, too. - Deor

        by stevie avebury on Mon May 13, 2013 at 08:01:07 AM PDT

        [ Parent ]

      •  Serious question (3+ / 0-)
        Recommended by:
        elwior, chimpy, davehouck

        What is $4,200,000,000 in goodwill?  How does one quantify goodwill, and what exactly does this mean?

        Is this based on projected revenues for current programming?

        Also... Clearly I don't understand how big ClearChannel is, but how do you rack up $20bn in debt?  

        “If the misery of the poor be caused not by the laws of nature, but by our institutions, great is our sin.” Charles Darwin

        by ivorybill on Mon May 13, 2013 at 12:45:18 PM PDT

        [ Parent ]

        •  When an existing company is sold from one ... (1+ / 0-)
          Recommended by:
          ivorybill

          ... owner to another, the purchase price may be greater than the market value of the assets less liabilities; and there can be a number of reasons for paying such a premium.  For instance the company's name may be well known and respected, with a loyal customer base and a reputation for producing a quality product.  Their market share and earnings history may suggest a company that is soundly run with prospects of continued steady success.  These types of intangibles that aren't attributable to the market value of other assets but are of value to the company's purchaser are called "goodwill".

          In Clear Channel's case, pretty much every time they purchased a radio station, there was probably a debit to the goodwill account in addition to the fair market value of the towers, transmitters, studio equipment, accounts receivable, FCC licenses, etc.

          ______________
          Love one another

          by davehouck on Mon May 13, 2013 at 07:24:34 PM PDT

          [ Parent ]

        •  In a liquidation is has little meaning (0+ / 0-)

          Unless it's popular brand (Hostess), patents (see Nortel), or in this case radio licenses. But as mentioned before, valuing radio licenses shouldn't have a good will value attached to them if the radio stations have been shut down or is losing money hand over fist.

          One can operate for a long time with a negative balance sheet, but they have to execute perfectly. This Flush Rush may just be enough to flush them away too.

          “ Success has a great tendency to conceal and throw a veil over the evil of men. ” — Demosthenes

          by Dburn on Tue May 14, 2013 at 08:52:38 AM PDT

          [ Parent ]

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