With iHeartMedia now in bankruptcy and much speculation on the eventual fate of Clear Channel Outdoor, Insider caught up with Max Drachman, V.P. at Kalil & Co., to get his thoughts on the possibilities.

Max, there has been a lot of early speculation about what happens to Clear Channel Outdoor. Should we expect anything to happen quickly?

Probably not, although the only thing I am basing this answer on is the fact that iHeart has been underwater for approximately ten years. Most people thought their bankruptcy was imminent for the last eight years or so.

There are several scenarios that could play out. Can you review the most likely outcomes?

There are still several different ways this could play out: Liberty could buy the debt to float iHeart through bankruptcy, then spin the Outdoor as I believe they have stated publicly that their primary interest is tying iHeart’s terrestrial radio to Liberty’s holdings with Sirius XM and Pandora.

The Cooperation Group of lenders could take 100% equity in CCO and spin it out as an independent REIT, or they could sell it. If they decide to sell it, I don’t believe they would spin it out market-by-market for fear of being left with several markets that may not attract retail multiples of cash flow.  There is also a strong likelihood they would hold it for a period of time.  It is no secret CCO has an excellent collection of assets and a very strong management team.  If they had better resources and less pressure coming from their parent, this company could take off in a hurry and go on a buying spree as opposed to selling anything.

If Clear Channel Outdoor does decide to sell in whole. Who are potential buyers?

There are several buyers that could take it in its entirety. While some strategics have some problematic overlap, I believe they could have any issues buttoned up prior to signing (spinning or swapping out of markets where their position would be too large). There are plenty of large Private Equity firms chasing Outdoor deals of consequence right now, and based on the highly attractive nature of CCO’s assets, I believe there would be significant demand.

Will there be federal scrutiny for such a large transaction?

There will certainly be scrutiny from the feds, however current oversight is coming from a deal-friendly administration, so I don’t believe there will be any issues a creative and willing buyer would not be able to solve.

Do you think a sale of CCO assets would be more valuable in whole or by region?

I do believe they could maximize value by piecing out individual markets or going by region. That said, when you look at the length of time these lenders have been in the trenches on this deal, it would not surprise me if a clean deal for the entire platform, at a slightly lower value than the sum of the parts, would be more appealing. They are probably more than ready to cash a ticket.

We are still involved in a ton of M&A. We closed a deal in Birmingham, AL on Monday, and a few deals out west in the last month, so the market remains very healthy for solid Outdoor assets. I have every reason to believe the market will remain healthy should CCO elect to spin off assets.

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