• John Weller on the Out of Home Debt Markets

    Today marks the debut of the Billboard Insider podcast. Our first guest is John Weller, co-publisher of Billboard Insider and a co-owner of Billboard Loans, LLC, an out of home lending fund.  John talks about out of home lending, what he thinks of the leverage of Lamar, Outfront and Clear Channel Outdoor and where we are in the lending cycle.

    John Weller

    In one word how would you evaluate the leverage of the three public out of home companies.  Let’s start with Lamar.

    Consistency.  The reason for that is they typically have lower leverage…their debt/cashflow is currently 3.3 times.  And that provides them with growth like we saw with the Fairway acquisition.

    How about Outfront?

    Aggressive.  They obviously have been making big bets on transit, particularly with their New York and Boston contracts, and leverage is a bit higher but it’s still in a reasonable range…they tend to run in the 4.5 range.

    And that brings us to Clear Channel

    Uncertainty.  They’re currently leveraged at over 8 times which is too high.  It needs to over time be brought down lower.  The uncertainty is what happens later this year when…Clear Channel separates from iHeart.  There’s a lot of opportunity but what happens may depend on their ownership group which initially will be made up of the iHeart lending group…I don’t think they’re going to be a very patient group and they may look to monetize their investment…

    Where are we in the current out of home lending cycle?

    As you go through a cycle you’ll come out of a recession..with practical, conservative lenders…They’ll stick to their knitting.  The next phase you’ll see will be lenders searching for growth.  And that will be when growth in profits is slowing from their existing customers and so you’ll start to see a push to bring in new business.  The next cycle, and this is where we are now, I would call the frenzy of growth.  Lenders become very aggressive in search for growth opportunities and start looking beyond traditional markets to maybe consider some other markets.  And we’re in this part of the cycle.  It’s been very favorable to outdoor.  And then typically as you enter into a recession there going to pull back and we’ll start the whole cycle all over again, but that pullback usually means that it can be a little difficult on smaller owner operators…

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