Insider wanted to break out Clear Channel Outdoor’s financial and liquidity update from their Press Release into a separate article as it provides guidance on CCO’s take of current economic conditions and their strategy over the short term. Here are those excerpts:
The Company believes the anticipated net proceeds from the sale of Clear Media combined with the cash on hand, including the $150 million recently drawn from the Revolving Credit Facility, and the initiatives the Company is actively pursuing will improve its liquidity position and provide the Company with additional financial flexibility during the economic downturn. These initiatives include but are not limited to:
- Identifying opportunities to significantly reduce annual capital expenditures.
- Discretionary growth capex can be largely deferred.
- Maintenance capex can be deferred to the extent possible.
- Exploring deferral options with respect to committed capex.
- Continuing discussions with landlords to align fixed site lease expenses with revenue during the economic downturn.
- Beginning to achieve success in both Europe and the U.S.
- Reducing employee compensation expense.
- Temporary salary reductions including 30% reductions for both the Company’s Worldwide CEO, William Eccleshare and Americas CEO, Scott Wells;
- Furloughs based on market conditions, hiring freezes and variable compensation reductions.
- Aggressively cutting discretionary spending.
However, given the quickly evolving economic environment, continuing downward pressure we are currently seeing in Europe and beginning to see in the U.S., and the uncertainty around how long the economic downturn and its impact on our business will last, the Company is withdrawing its guidance for 2020, previously provided on February 27, 2020. As a reminder, the Company’s next material debt maturity is 2024 when the Company’s $1.9 billion in 9.25% Senior Notes are due.
Insiders Take: Good to see Wells and Eccleshare leading by example with 30% salary reductions. Selling Clear Media China for $253 million cash eliminates a massive management distraction as well as a drag on future earnings and pays about 7 months worth of Clear Channel Outdoor interest expense. Well done on that front. Clear Channel’s Debt/Cashflow is 6.62, well above Lamar (3.5) or Outfront (5.4) so there’s work to be done. You can expect leverage to rise for the next couple quarters due to reduced cashflow. The market liked what it heard. CCO saw an 18% increase in stock value after the announcement.
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