Clear Channel restructuring 'inevitable'-Moody's

NEW YORK Feb 24 (Reuters) - A restructuring of radio broadcaster Clear Channel Communications is inevitable, though its private equity owners Bain Capital and Thomas H. Lee Partners may try to delay it as long as possible, Moody's Investors Service said in a new report.

While Clear Channel could issue additional debt through its outdoor unit to make it through 2014, that would only postpone a restructuring by a couple of years, Moody's analyst and lead author Neil Begley said.

The company will still face a critical hurdle in 2016, when about $13.8 billion of debt comes due, and leverage is expected to remain too high to attract more investment and refinance the debt, Moody's said.

"It is clear under our assumptions for operating improvement and valuation multiples that the company's debt levels are unmanageable and unrefinancable," the rating agency said.

A spokesman for Bain Capital declined comment. A spokesman for Thomas H. Lee [THL.UL] could not immediately be reached for comment.

Laden with nearly $16 billion in additional debt by its 2008 buyout, Clear Channel then faced tumbling advertising revenues amid one of the worst consumer-led recessions in recent history, Moody's said.

The rating agency said it expects Clear Channel to burn cash through 2011 because of its investment in outdoor digital signage and paralyzing debt service costs.

Even though it will likely begin to generate modest free cash flow in 2013, it is not expected to be able to refinance about $3.7 billion of debt due in 2014 with cash on hand, Moody's said.

To postpone a restructuring and refinance its maturities, however, Moody's said it expects the company to sell more debt through its outdoor subsidiary.

The outdoor unit in December raised $2.5 billion in the high-yield market, using proceeds to repay debt owed to Clear Channel.

Bain Capital and Thomas Lee Partners will likely do everything they can to keep the company out of bankruptcy as long as possible in the hopes that the advertising environment improves and some value is restored, the rating agency said.

If Clear Channel were to file for Chapter 11 bankruptcy protection, control of the company would be turned over to the creditors and the sponsors' initial investment would be lost, Moody's said.

Moody's recently raised its ratings on Clear Channel, saying that the December refinancing has eliminated the risk of an imminent restructuring or bankruptcy. However, the agency warned at the time that a restructuring would likely be needed eventually. For details click on [ID:nN12235848].

Standard & Poor's also raised its rating on Clear Channel, citing improved liquidity after the December debt sale. (Reporting by Dena Aubin; Editing by Dan Grebler)