Here are two tables, prepared by Moorgate Capital Partners, which calculate the weighted average cost of debt and leverage (net debt/adjusted cashflow) for the public out of home companies as of December 2023.  Some observations:

• No surprise that the cost of debt goes up as leverage goes up.  Clear Channel Outdoor has a 7.5% cost of debt because leverage is a high 10:1.  Lamar has a 5% cost of debt because leverage is a low 3.4.
• The cost of debt has been largely stable at the out of home companies after rising sharply in 2021 and 2022.

Debt doesn’t just pose a financial risk.  It has opportunity costs because it limits a company’s capital expenditures and acquisitions.  Clear Channel Outdoor’s interest payments account for  78% of  cashflow.   Lamar’s interest payments are only 16% of cashflow.  Small wonder that Lamar spends more than three times as much per year on capital expenditures and acquisitions than Clear Channel Outdoor.

To obtain a copy of Moorgate’s 4Q 2023 OOH report contact Jeff Seddon, Vice President, Moorgate Capital Partners, jeff.seddon@moorgatepartners.com, 609-276-2508.

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