THL says Clear Channel a good investment

NEW YORK (Reuters) - A top executive at private equity firm Thomas H. Lee Partners said on Wednesday that media companies Clear Channel Communications and Univision are "inherently great businesses" and that the recession in advertising would reverse.

Boston-based THL and Bain Capital together bought radio operator Clear Channel in 2008 in a $17.9 billion deal and was among a consortium that bought broadcaster Univision in a $12.3 billion deal agreed to in 2006.

Scott Sperling, co-president of THL, said Clear Channel and Univision are "two, we think, inherently great businesses, that over the long term will tend to perform reasonably well."

"That being said, it is a horrible environment that has significantly affected their performance," said Sperling, speaking at the Reuters Private Equity and Hedge Funds Summit.

Sperling said the investments were feeling the pressure of "one of the worst advertising cycles we've seen," but said that would improve.

"We think the market will come back," he said. "The advertising market has always been a leading edge of the recession. It went down every single recession ... It has historically come back to trendline."

"When we made this investment, we assumed there would be an advertising recession in the '09 period and we assumed it would be as bad as the average of what we saw in (previous) recessions," he said. "It was worse and it was earlier, and it will probably last longer, but we believe it will come back."

When advertising rebounds, Clear Channel will be a beneficiary, while Univision "still has the benefit of riding the Spanish language demographic growth, which is very significant," he said.

Sperling also said he expects those businesses to meet covenants.

"Every model we have run, at least, has us making covenants," he said.

THL has a significant amount of cash still to invest from its latest fund but Sperling said it was hard to find good investment opportunities. About 45 percent of the firm's Thomas H. Lee Fund VI has been invested, he said.

Sperling said it was unlikely THL would be buying toxic assets in the government program, as they are particularly real-estate focused securities.

"Its not likely that we would migrate to that," he said.

The U.S. Treasury Department on Monday unveiled a plan offering to provide as much as $1 trillion in financing for large investment funds that agree to acquire assets from the books of troubled banks.

(Reporting by Megan Davies; editing by Carol Bishopric)