IHeartMedia’s debt-levels are becoming too much for Broker-dealer Topeka Capital Markets.
The company has downgraded Clear Channel Outdoor Holdings two points to Sell from a previous Buy recommendation.
Shares in CCO have dropped 59% over the past six months and Wednesday, Topeka Capital’s David Miller cut the target price further, to $2 from a previous $11 — 45% below Wednesday’s price of $3.63.
Miller cited capital structure issues at iHeartMedia for the drop, in a research note to clients.
The primary challenge faced by Clear Channel is leverage at iHeartMedia, in particular, the $197 million in maturities due in December 2016, as well as $8.3 billion in senior secured debt due in 2019.
We noted CCO parent iHeartMedia collected nearly $370 million by selling 400 radio towers to Vertical Bridge last April; But analysts expected more, potentially some 1,000, towers would be sold.
This, was combined with expectations that Clear Channel’s European billboard business would be sold for net proceeds of $3 billion, which could then have been used “to pare off 2016 maturities at the IHRT level,” according to the analyst. A Paris-based competitor expressed interest, but the two parties could not agree on agree on valuation and the deal fell through, according to Miller.
