Moorgate Capital Partners has analyzed out of home leverage and cost of debt trends thru September 2023. Some chart’s in Moorgate’s report caught Billboard Insider’s eye. Weighted average debt costs have increased at the public out of home companies over the past two years although the rise has slowed during the past quarter.
- Lamar Advertising’s weighted average cost of debt has increased from a low of 3.2% at December 2021 to 5.0% at September 2023.
- OUTFRONT Media’s weighted average cost of debt has risen from 4.3% at September 2021 to 5.5% at September 2023
- Clear Channel Outdoor’s weighted average cost of debt has increased from 5.5% at September 2021 to to 7.5% at September 2023.
Public out of home company leverage (net debt to adjusted ebidta) has been declining over the past two years as revenues and cashflow rebound from covid lows. Lamar Advertising has the lowest leverage at 3.5 times. Clear Channel has the highest leverage at 10.2 times.
Leverage makes sense when it’s used moderately because the cost of debt (5-7% for the public out of home companies) is way less than the 14-20% equity return that the market expects from out of home companies. But debt can hurt long term values by limiting your ability to grow. Interest expense accounted for 74% of Clear Channel outdoor’s cashflow during the third quarter of 2023 (see table below). That leave little free cashflow for tuck-in acquisitions or digital billboard conversions. No wonder Clear Channel Outdoor CEO Scott Wells would like to see interest rates decline.
If you are interested in obtaining Moorgate’s 3Q 2023 OOH report contact Jeff Seddon, Vice President, Moorgate Capital Partners, jeff.seddon@moorgatepartners.com, 609-276-2508.
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Great post. Thanks guys!