Clear Channel

Clear Channel Communications is a very large and diverse entertainment and media business (Website) that operates throughout the entire world.   Clear Channel is by far the the largest radio broadcasting company in the United States, and the dominant provider of syndicated radio programming. As of May 2009, Clear Channel owns and operates about 262 AM and 633 FM radio stations in the United States. At its peak, Clear Channel owned about 1,200 radio stations and 56 TV stations.

Clear Channel operates radio stations in 24 of the top 25 markets, and 47 of the top 50. Clear Channel also owns Premiere Radio, which syndicates a large list of programs, including Rush Limbaugh, Glenn Beck, Dr. Laura Schlessinger, Dr. Dean Edell, Sean Hannity (since 2008), Steve Harvey, Jason Williams, Jesse Jackson, Randi Rhodes, Jim Rome, Bob Costas [until 2009], Bill Handel, Mike McConnell,  Leo Laporte, Fox News Radio, Fox Sports Radio, Delilah, Ryan Seacrest,  and in excess of 20 music related  satellite delivered music channels.

The corporate organization and history of Clear Channel is very complex and long, so this page contains a lot of information. It’s difficult to be both completely accurate in every detail and yet still be understandable to a lay person reading this. Perhaps that is the point of complexity.  For a really good history of Clear Channel, pick up a copy of “Right of the Dial” by Alec Foege published by MacMillan in 2009 . [ISBN 0865479968]

As of 2009, Clear Channel is a privately held company, financed by about $20 billion in loans from a consortium of banks. There is a publicly traded “stub” company that consists of Clear Channel Outdoors (Symbol CCO), which is in the outdoor advertising business (Billboards,  Airport advertising, Train and Bus ads, furniture ads (think Bus Stop Benches),  and similar advertising venues.

History

Clear Channel is the poster child for the potential of the deregulation of radio in 1996, and the disaster it can turn into. Clear Channel is the result of a frenzy of Acquisition and Mergers. You can get a sense of how complex this company is from the corporate hierarchy chart they file with the FCC, available [here].  From the top level corporate entity to the smallest subowner, there are up to 14 layers of ownership.  Looking at that chart is useful to understand each of its pieces.

The central characters in the Clear Channel story are  Lester (Lowry) Mays  and Red McCombs.  They acquired an FM radio station in 1972 and created San Antonio Broadcasting.  Their first big acquisition was WOAI-AM, the 50kw “Clear Channel” AM radio station in San Antonio.

Lowry Mays is the Chairman Emeritus – his son Mark Mays is the CEO of the parent company, and his other son Randall Mays is the President and CFO.

Red McCombs was/is a Ford Car dealer in the San Antonio Area.  He later went on to be the owner of the Minnesota Vikings, the Denver Nuggets and the San Antonio Spurs.  Mr McCombs has been quite public about his problem fighting alcoholism in the 1970s, which almost took his life.  Think Big Texan Wheeler Dealer wearing a big Stetson and you have a pretty good mental image of Red McCombs.  Tons of common sense and people skills – and not afraid to make bold decisions.  He pushes people to make decisions and then let the College Boys (the Mays sons) sort out the details.  He remained involved with Clear Channel up until the company was “taken private”.

In 1984, Clear Channel did the first IPO, and used the proceeds to acquire Broad Street Communications, giving them 6 AM and 6 FM stations.  This was still in the era of the highly restrictive national ownership caps. In 1988, they acquired their first TV station.  The Local Market ownership caps at the time had limits on cross ownership of “too many” TV and Radio stations in the same market.

From 1989 to 1992, the company acquired more TV stations. In 1992, the FCC started to relax the rules on local ownership.  If a city had a “failing” station, an existing owner already in the market was allowed to acquire the second (“duopoloy”) station even though it would have exceeded the ownership limits (this action roughly parallels the treatment of newspapers, where two newspapers are allowed to merge because the alternative is that one of them will fail anyway – see Detroit News/Free Press, Pittsburgh Press/Post-Gazette, etc…)

By 1995, the company had accumulated 43 radio stations and 16 TV stations, and life was good.

In 1996, Congress ends the national ownership limit, and greatly relaxes the limits within one media market.  The race to become the biggest fish begins, just the kind of contest a Texan would enjoy.

Clear Channel acquires 49 stations and buys a 1/3 interest in a radio company in New Zealand. In 1997, the company acquires interests in the Outdoor Advertising business and swallows up Paxson’s 43 radio stations.     Clear Channel now has 173 radio stations and is large enough that their stock gets added to the S&P 500 index – which means big institutional investors can start pouring in money and gives them a big leg up on the race to become the top cowboy.

In 1998, Clear Channel announces it will eat up Jacor (bringing the radio total to 204), firms up their presence in the outdoor advertising business and buys a 40% stake in a radio company in Mexico. Jacor was a combination of its own stations, the recent acquisition of Citicasters and owned a programming syndication company called Premiere.  [Jacor Company History].   The acquisition was completed in 1999 and Clear Channel then had 625 radio stations, and looks pretty similar to today’s Clear Channel.  They also entered the outdoor advertising business in Europe.

In 1999, Clear Channel announced the acquisition of AMFM, Inc – another of the companies buying up radio stations as fast as they could (AMFM had already acquired Capstar).    They also announced they would acquire Ackerly Broadcasting (completed in 2002) and SFX Entertainment (which would eventually evolve into LiveNation).  At the end of 2000, Clear Channel controlled 1,100 radio stations in the United States.

Then the speculative Clinton Era Stock Market Bubble burst.  Companies built on debt and IPOs started to fail left and right, and ugly facts were turned up about how some companies (not Clear Channel – Worldcom, Enron, Global Crossing, Adelphia among others) were hiding liabilities off their balance sheets, loaning money to their corporate managers to buy stock to further pump up the stock price, and many abuses of financial reporting.

The result was the passage of Sarbanes Oxley in 2002, which intended to put an end to the Wild West of the late 1990s.   Company Management and Auditors could become civilly and potentially criminally liable if they misled investors or hid problems in their SEC filings.  The worst of the ways companies had misused corporate funds for personal gain were outlawed.   The urge to go private began in full earnest.   Sarbanes Oxley does not apply to privately held companies.

In 2005, the company offered 10% of Clear Channel Outdoors to the public, and spun off the entertainment company into a separate company.  Other radio companies were starting to take large write downs on their overpriced radio station licenses that had been acquired during the speculative boom.

Near the end of 2006, Clear Channel announced its intent to “go private” and held an auction to find the best deal – the winner was a proposal by venture capital firms Bain Capital and Thomas H. Lee Partners, backed with money by a group of banks.    Pushing such a large transaction through the FCC and the Justice Department’s antitrust division took a long time.   The delay was not unexpected.

In order to comply with the ownership limits (some of which were exceeded by Clear Channel due to grandfathered ownership where Jacor, AMFM, Citicasters had ownership in the same market), the change in ownership required Clear Channel to divest a number of radio stations, which were moved into an entity called the Aloha Trust.  Aloha Trust is tasked with selling off those stations as rapidly as prudent.   (that’s a tough thing to do in 2009).

During the time the transaction was in limbo, the radio business started to deteriorate and the damage soon to be caused by “Mark to Market” rules as the Auditors became terrified of their potential criminal liability under Sarbanes Oxley was becoming evident.

The banks funding the Clear Channel transaction got nervous and wanted to back out.  Wachovia tried to back out of funding the Newport TV deal.  It took threats of a lawsuit and high pressure negotiation of a lower purchase price to eventually get the deal past the finish line in July 2008.  Bear Stearns has just failed, Lehman Brothers was about to file Chapter 11.

The 6 banks that were part of the Bain Capital lead syndicate are:

  • Citigroup,
  • Deutsche Bank
  • Morgan Stanley
  • Credit Suisse
  • Royal Bank of Scotland
  • Wachovia

The banks were not able to market the Clear Channel bonds to investors at a reasonable price due to the growing perception of high risk as the station license writedowns were picking up momentum.   Before the collapse of the investment banking business, Clear Channel’s subordinated bonds were down to a discount of $.60 on the dollar, yielding around 18%, but there were few buyers and the Credit Rating agencies savaged the bonds.  (As of 2009, some of the bonds are as low as $.13 on the dollar)

The Private Equity Firms that participated included:

With Clear Channel now private, the company owes about $20 billion on their credit facility and bonds.    The TV stations were spun off to a company called Newport TV, which acquired the 56 Clear Channel TV stations for $1.02 billion, which was used to pay down some of the costs of going private.

Clear Channel also announced it intended to divest itself of about 450 “small market” radio stations and focus its attention mainly on major market radio.   Many of the divested small stations were acquired by GAP Holdings (parent of  GAP broadcasting of Dallas Texas and Gapwest of Scottsdale Arizona).   GAP owns 116 radio stations and is privately held by Oaktree Capital Management, a private equity firm headed by Howard Marks, a company that likes to buy up “distressed” companies and turn them around.

Other clusters were sold to local buyers, in several cases the original radio owners who had sold the same stations to Clear Channel (or one of its components).

Facing a plunging market in advertising on Radio and the pressure of its debt, Clear Channel has been drastically trying to reduce costs and increase cash flow by firing much of its sales force (great idea to increase sales!) and replacing local programming with nationally syndicated programming.    Clear Channel’s strategy puts them right in the bulls eye of those who want the FCC to undo the radio consolidation of 1996 and return to the 1960s when radio had local hosts talking about carrot cake recipes, reading obituaries, today in history and the swap shop program, and play Johnny Mathis records – that great programming of yesteryear  (as if the Internet hasn’t made all of the above pointless).

Clear Channel has been the most aggressive early adopter of HD Radio, rolling it out on most of its FM stations.  They also streams most of the programming of their radio stations onto the Internet (at least 736 of their radio stations do stream).   The iHeartRadio software allows streaming their programs to iPhones and Blackberry devices.

Congress is also talking about requiring radio station owners to pay music performers for using their music “over the air”.   Since the 1960s, radio has enjoyed an exemption from Performance Royalties and has played music for free, unlike public venues (restaurants, stores, shopping malls) and the Internet.   If that exemption is lifted, Clear Channel (and everyone else running a music radio station) would have a huge increase in the expenses of airing music radio.

In February 2009, Clear Channel emptied out the entire remaining $1.6 Billion balance of their revolving credit facility to “improve the liquidity” (like borrowing on your credit cards so you can make the minimum payments on your other credit cards for a few months).  Not a good sign.

Air America declared Chapter 7 bankrupcty in January 2010. Clear Channel was one of the main broadcasters of Air America programming, so its sudden closure created a number of format and programming changes in early 2010.

Clear Channel is still expected to struggle with its debt load. In December 2009, the company did a 15 year bond offering of $2.5 billion via its Clear Channel outdoors subsidiary, giving the company some liquidity and pushing the debt repayment further into the future, buying it breathing room for a year or so.

Major Stations – top 25 markets

Unlike every other publicly traded Radio Station owner, Clear Channel owns so many radio stations it just lists counts of how many stations they own in every market, not the actual stations.   Since I’m relying on my own non-standard classifications, there are likely some errors in this list:

+-------------+---------------------------+-------------------+---------------------------+
| Station     | Format                    | City              | Metro Area                |
+-------------+---------------------------+-------------------+---------------------------+
| WALK FM/HD1 | AC / Variety / Mix        | PATCHOGUE         | New York, NY (Long Island)|
| WAXQ FM/HD1 | Classic Rock / Hits       | NEW YORK          | New York, NY              |
| WHTZ FM/HD1 | Contemporary Hits         | NEWARK            | New York, NY              |
| WKTU FM/HD1 | Contemporary Hits         | LAKE SUCCESS      | New York, NY              |
| WLTW FM/HD1 | AC / Variety / Mix        | NEW YORK          | New York, NY              |
| WWPR FM/HD1 | Young Urban / Hip Hop     | NEW YORK          | New York, NY              |
| KFI AM/HD   | Conservative News/Talk    | LOS ANGELES       | Los Angeles, CA           |
| KLAC AM/HD  | Sports                    | LOS ANGELES       | Los Angeles, CA           |
| KTLK AM     | Liberal News/Talk         | LOS ANGELES       | Los Angeles, CA           |
| KBIG FM/HD1 | Contemporary Hits         | LOS ANGELES       | Los Angeles, CA           |
| KHHT FM/HD1 | Adult R&B / Soul          | LOS ANGELES       | Los Angeles, CA           |
| KIIS FM/HD1 | Contemporary Hits         | LOS ANGELES       | Los Angeles, CA           |
| KOST FM/HD1 | Soft/Lite Rock            | LOS ANGELES       | Los Angeles, CA           |
| KYSR FM/HD1 | AC / Variety / Mix        | LOS ANGELES       | Los Angeles, CA           |
| WVON AM/HD  | Urban News/Talk           | BERWYN            | Chicago, IL               |
| WGCI FM/HD1 | Young Urban / Hip Hop     | CHICAGO           | Chicago, IL               |
| WKSC FM/HD1 | Contemporary Hits         | CHICAGO           | Chicago, IL               |
| WLIT FM/HD1 | AC / Variety / Mix        | CHICAGO           | Chicago, IL               |
| WNUA FM/HD1 | Jazz                      | CHICAGO           | Chicago, IL               |
| WVAZ FM/HD1 | Adult R&B / Soul          | OAK PARK          | Chicago, IL               |
| WGRB AM/HD  | Gospel                    | CHICAGO           | Chicago, IL               |
| KNEW AM/HD  | Conservative News/Talk    | OAKLAND           | San Francisco, CA         |
| KIOI FM/HD1 | Contemporary Hits         | SAN FRANCISCO     | San Francisco, CA         |
| KISQ FM/HD1 | Adult R&B / Soul          | SAN FRANCISCO     | San Francisco, CA         |
| KKSF FM/HD1 | Classic Rock (was Jazz)   | SAN FRANCISCO     | San Francisco, CA         |
| KMEL FM/HD1 | Young Urban / Hip Hop     | SAN FRANCISCO     | San Francisco, CA         |
| KUFX FM/HD1 | Classic Rock / Hits       | SAN JOSE          | San Francisco, CA         |
| KYLD FM/HD1 | Young Urban / Hip Hop     | SAN FRANCISCO     | San Francisco, CA         |
| KKGN AM/HD  | Libeal News/Talk          | OAKLAND           | San Francisco, CA         |
| KFXR AM     | All News                  | DALLAS            | Dallas-Ft. Worth, TX      |
| KDMX FM/HD1 | AC / Variety / Mix        | DALLAS            | Dallas-Ft. Worth, TX      |
| KEGL FM/HD1 | Alternative/Hard/New Rock | FORT WORTH        | Dallas-Ft. Worth, TX      |
| KHKS FM/HD1 | Contemporary Hits         | DENTON            | Dallas-Ft. Worth, TX      |
| KZPS FM/HD1 | Classic Rock / Hits       | DALLAS            | Dallas-Ft. Worth, TX      |
| KDGE FM/HD1 | Alternative/Hard/New Rock | FORT WORTH-DALLAS | Dallas-Ft. Worth, TX      |
| WISX FM/HD1 | Contemporary Hits         | PHILADELPHIA      | Philadelphia, PA          |
| WRFF FM/HD1 | Alternative/Hard/New Rock | PHILADELPHIA      | Philadelphia, PA          |
| WDAS FM/HD1 | Adult R&B / Soul          | PHILADELPHIA      | Philadelphia, PA          |
| WIOQ FM/HD1 | Contemporary Hits         | PHILADELPHIA      | Philadelphia, PA          |
| WUSL FM/HD1 | Young Urban / Hip Hop     | PHILADELPHIA      | Philadelphia, PA          |
| WZZO FM/HD1 | Alternative/Hard/New Rock | BETHLEHEM         | Philadelphia, PA          |
| WUBA AM/HD  | Spanish Music - Other     | PHILADELPHIA      | Philadelphia, PA          |
| KBME AM/HD  | Sports                    | HOUSTON           | Houston, TX               |
| KPRC AM/HD  | Conservative News/Talk    | HOUSTON           | Houston, TX               |
| KTRH AM     | Conservative News/Talk    | HOUSTON           | Houston, TX               |
| KKRW FM/HD1 | Classic Rock / Hits       | HOUSTON           | Houston, TX               |
| KODA FM/HD1 | Soft/Lite Rock            | HOUSTON           | Houston, TX               |
| KTBZ FM/HD1 | Alternative/Hard/New Rock | HOUSTON           | Houston, TX               |
| WASH FM/HD1 | Easy Listening            | WASHINGTON        | Washington, DC            |
| WBIG FM/HD1 | Classic Rock / Hits       | WASHINGTON        | Washington, DC            |
| WFRE FM/HD1 | Country                   | FREDERICK         | Washington, DC            |
| WIHT FM/HD1 | Contemporary Hits         | WASHINGTON        | Washington, DC            |
| WMZQ FM/HD1 | Country                   | WASHINGTON        | Washington, DC            |
| WWDC FM/HD1 | Alternative/Hard/New Rock | WASHINGTON        | Washington, DC            |
| WDFN AM/HD  | Sports                    | DETROIT           | Detroit, MI               |
| WDTW FM/HD1 | Alternative/Hard/New Rock | DETROIT           | Detroit, MI               |
| WJLB FM/HD1 | Young Urban / Hip Hop     | DETROIT           | Detroit, MI               |
| WKQI FM/HD1 | Young Urban / Hip Hop     | DETROIT           | Detroit, MI               |
| WMXD FM/HD1 | Adult R&B / Soul          | DETROIT           | Detroit, MI               |
| WNIC FM/HD1 | AC / Variety / Mix        | DEARBORN          | Detroit, MI               |
| WDTW AM     | Liberal News/Talk         | DEARBORN          | Detroit, MI               |
| WGST AM     | Conservative News/Talk    | ATLANTA           | Atlanta, GA               |
| WBZY FM/HD1 | Alternative/Hard/New Rock | BOWDON            | Atlanta, GA               |
| WKLS FM/HD1 | Classic Rock / Hits       | ATLANTA           | Atlanta, GA               |
| WUBL FM/HD1 | Country                   | ATLANTA           | Atlanta, GA               |
| WWVA FM/HD1 | Spanish CHR/Latino        | CANTON            | Atlanta, GA               |
| WGIR AM     | Conservative News/Talk    | MANCHESTER        | Boston, MA                |
| WKOX AM     | Mexican Regional          | NEWTON            | Boston, MA                |
| WJMN FM/HD1 | Young Urban / Hip Hop     | BOSTON            | Boston, MA                |
| WSNE FM/HD1 | AC / Variety / Mix        | TAUNTON           | Boston, MA                |
| WXKS AM     | Conservative Talk         | NEWTON            | Boston, MA                |

| WXKS FM/HD1 | Contemporary Hits         | MEDFORD           | Boston, MA                |
| WINZ AM     | Sports                    | MIAMI             | Miami, FL                 |
| WIOD AM     | Conservative News/Talk    | MIAMI             | Miami, FL                 |
| WBGG FM     | Classic Rock / Hits       | FORT LAUDERDALE   | Miami, FL                 |
| WHYI FM/HD1 | Contemporary Hits         | FORT LAUDERDALE   | Miami, FL                 |
| WMIB FM/HD1 | Young Urban / Hip Hop     | FORT LAUDERDALE   | Miami, FL                 |
| WMGE FM/HD1 | Spanish HipHop            | MIAMI BEACH       | Miami, FL                 |
| WMIA FM     | Dance/Party Music         | MIAMI BEACH       | Miami, FL                 |
| KHHO AM/HD  | Sports                    | TACOMA            | Seattle, WA               |
| KJR AM      | Sports                    | SEATTLE           | Seattle, WA               |
| KBKS FM/HD1 | Contemporary Hits         | TACOMA            | Seattle, WA               |
| KFNK FM/HD1 | Alternative/Hard/New Rock | EATONVILLE        | Seattle, WA               |
| KJR FM/HD1  | Classic Rock / Hits       | SEATTLE           | Seattle, WA               |
| KUBE FM/HD1 | Young Urban / Hip Hop     | SEATTLE           | Seattle, WA               |
| KNBQ FM/HD1 | Country                   | CENTRALIA         | Seattle, WA               |
| KFYI AM/HD  | Conservative News/Talk    | PHOENIX           | Phoenix, AZ               |
| KGME AM/HD  | Sports                    | PHOENIX           | Phoenix, AZ               |
| KOY AM/HD   | Oldies                    | PHOENIX           | Phoenix, AZ               |
| KESZ FM/HD1 | Soft/Lite Rock            | PHOENIX           | Phoenix, AZ               |
| KMXP FM/HD1 | AC / Variety / Mix        | PHOENIX           | Phoenix, AZ               |
| KNIX FM/HD1 | Country                   | PHOENIX           | Phoenix, AZ               |
| KYOT FM/HD1 | Jazz                      | PHOENIX           | Phoenix, AZ               |
| KZZP FM/HD1 | Contemporary Hits         | MESA              | Phoenix, AZ               |
| KFAN AM/HD  | Sports                    | MINNEAPOLIS       | Minneapolis-St. Paul, MN  |
| KFXN AM     | Sports                    | MINNEAPOLIS       | Minneapolis-St. Paul, MN  |
| KDWB FM/HD1 | Contemporary Hits         | RICHFIELD         | Minneapolis-St. Paul, MN  |
| KQQL FM/HD1 | Oldies                    | ANOKA             | Minneapolis-St. Paul, MN  |
| KTCZ FM/HD1 | Classic Rock / Hits       | MINNEAPOLIS       | Minneapolis-St. Paul, MN  |
| KEEY FM/HD1 | Country                   | ST PAUL           | Minneapolis-St. Paul, MN  |
| KTLK FM/HD1 | Conservative News/Talk    | MINNEAPOLIS       | Minneapolis-St. Paul, MN  |
| KOGO AM/HD  | Conservative News/Talk    | SAN DIEGO         | San Diego, CA             |
| KGB FM/HD1  | Classic Rock / Hits       | SAN DIEGO         | San Diego, CA             |
| KHTS FM/HD1 | Contemporary Hits         | EL CAJON          | San Diego, CA             |
| KIOZ FM/HD1 | Alternative/Hard/New Rock | SAN DIEGO         | San Diego, CA             |
| KMYI FM/HD1 | Soft/Lite Rock            | SAN DIEGO         | San Diego, CA             |
| KLSD AM     | Sports                    | SAN DIEGO         | San Diego, CA             |
| KUSS FM/HD1 | Country                   | CARLSBAD          | San Diego, CA             |
| WFLA AM/HD  | Conservative News/Talk    | TAMPA             | Tampa-St. Pete, FL        |
| WHNZ AM/HD  | Liberal News/Talk         | TAMPA             | Tampa-St. Pete, FL        |
| WFLZ FM/HD1 | Contemporary Hits         | TAMPA             | Tampa-St. Pete, FL        |
| WMTX FM/HD1 | AC / Variety / Mix        | TAMPA             | Tampa-St. Pete, FL        |
| WXTB FM/HD1 | Alternative/Hard/New Rock | CLEARWATER        | Tampa-St. Pete, FL        |
| WBTP FM/HD1 | Young Urban / Hip Hop     | CLEARWATER        | Tampa-St. Pete, FL        |
| WDAE AM/HD  | Sports                    | ST PETERSBURG     | Tampa-St. Pete, FL        |
| WFUS FM/HD1 | Country                   | GULFPORT          | Tampa-St. Pete, FL        |
| KATZ FM/HD1 | Young Urban / Hip Hop     | ALTON             | St. Louis, MO             |
| KMJM FM/HD1 | Young Urban / Hip Hop     | COLUMBIA          | St. Louis, MO             |
| KATZ AM/HD  | Gospel                    | ST LOUIS          | St. Louis, MO             |
| KSD FM/HD1  | Country                   | ST LOUIS          | St. Louis, MO             |
| KSLZ FM/HD1 | Contemporary Hits         | ST LOUIS          | St. Louis, MO             |
| KLOU FM/HD1 | Classic Rock / Hits       | ST LOUIS          | St. Louis, MO             |
| WSDD FM/HD1 | Modern Rock               | Alton, IL         | St. Louis, MO             |
| WCAO AM/HD  | Gospel                    | BALTIMORE         | Baltimore, MD             |
| WPOC FM/HD1 | Country                   | BALTIMORE         | Baltimore, MD             |
| WCHH FM/HD1 | AC / Variety / Mix        | BALTIMORE         | Baltimore, MD             |
| WQSR FM/HD1 | Classic Rock              | Baltimore         | Baltimore, MD             |
| KHOW AM/HD  | Conservative News/Talk    | DENVER            | Denver/Boulder, CO        |
| KKZN AM/HD  | Liberal News/Talk         | THORNTON          | Denver/Boulder, CO        |
| KOA AM/HD   | Conservative News/Talk    | DENVER            | Denver-Boulder, CO        |
| KBCO FM/HD1 | Classic Rock / Hits       | BOULDER           | Denver/Boulder, CO        |
| KBPI FM/HD1 | Alternative/Hard/New Rock | DENVER            | Denver/Boulder, CO        |
| KRFX FM/HD1 | Classic Rock / Hits       | DENVER            | Denver/Boulder, CO        |
| KTCL FM/HD1 | Alternative/Hard/New Rock | WHEAT RIDGE       | Denver/Boulder, CO        |
| KPTT FM/HD1 | Dance/Party Music         | DENVER            | Denver/Boulder, CO        |
| WBGG AM     | Sports                    | PITTSBURGH        | Pittsburgh, PA            |
| WDVE FM/HD1 | Alternative/Hard/New Rock | PITTSBURGH        | Pittsburgh, PA            |
| WKST FM/HD1 | Contemporary Hits         | PITTSBURGH        | Pittsburgh, PA            |
| WWSW FM/HD1 | Classic Rock / Hits       | PITTSBURGH        | Pittsburgh, PA            |
| WXDX FM     | Alternative/Hard/New Rock | PITTSBURGH        | Pittsburgh, PA            |
| WPGB FM/HD1 | Conservative News/Talk    | PITTSBURGH        | Pittsburgh, PA            |
| KEX AM/HD   | Conservative News/Talk    | PORTLAND          | Portland, OR              |
| KKCW FM/HD1 | AC / Variety / Mix        | BEAVERTON         | Portland, OR              |
| KQOL FM/HD1 | Classic Rock / Hits       | VANCOUVER         | Portland, OR              |
| KKRZ FM/HD1 | Contemporary Hits         | PORTLAND          | Portland, OR              |
| KPOJ AM     | Liberal News/Talk         | PORTLAND          | Portland, OR              |
| KLTH FM/HD1 | Oldies                    | Lake Oswego       | Portland, OR              |
| WTAM AM/HD  | Balanced News/Talk        | CLEVELAND         | Cleveland, OH             |
| WGAR FM/HD1 | Country                   | CLEVELAND         | Cleveland, OH             |
| WMJI FM/HD1 | Classic Rock / Hits       | CLEVELAND         | Cleveland, OH             |
| WMMS FM/HD1 | Alternative/Hard/New Rock | CLEVELAND         | Cleveland, OH             |
| WMVX FM/HD1 | AC / Variety / Mix        | CLEVELAND         | Cleveland, OH             |
+-------------+---------------------------+-------------------+---------------------------+

Ownership

Clear Channel has 3 classes of stock

There are 23 million Class A shares.  Some Clear Channel investors opted to take Class A shares rather than $36/share.  The Class A shares were traded for a while on the Over the Counter Bulletin Board, but there is no longer an active market in the stock.  Each share of Class A stock gets one vote.  The Mays family is the main holder of  the Class A stock.

There are about 555,000 shares of Class B stock.    Each share of Class B gets a number of votes equal to (#B + #C)/#B.  Each share of Class B stock gets about 120 votes for each share.  Essentially, the Class B/C structure creates non-voting voting stock.  Class B stock holds 72% of the voting rights.   The Mays brothers get 2 seats on the board, but the Class B owners have the right to name the rest of the Board of Directors.

100% of the Class B stock is held by Clear Channel Capital IV, LLC (managed by Thomas Lee)

There are approximately 59 million shares of class C stock, which have no voting rights.  Class C stock is held 100% by Clear Channel Capital V, LLC. (managed by Bain Capital).

By being non-voting stock and not being involved in the operational decisions of the stations (right!), the Class C ownership interest is not subject to the FCC’s 20% (25%?) limits on foreign ownership of U.S. Radio Station licenses.

Three of the 6 banks involved in the funding are non-U.S. banks. CitiGroup and Morgan Stanley, which headquartered in New York are global banks.  The leader of the syndicate is Deutsche Bank of Germany.  The only mostly “American” bank in the group is Wachovia, which the Fed tried to “push over” into the waiting arms of Citigroup during the so called “Banking Crisis”. Wachovia escaped that bold takeover move by Citi and their friends in the U.S. government (See: Hank Paulson and Tim Geithner) and are now part of Wells Fargo – at least for now.

The non-proportional voting rights of the Class B stock essentially give the private equity owners control of the company, while keeping them from appearing to be foreign owners or agents in the eyes of the FCC (because the Class C stock does not “technically” have direct voting rights).

Management

Lowry Mays is the Chairman Emeritus of the company.  He became “Emeritus” at the conclusion of the privatization transaction.

Board of Directors

  • Mark Mays CEO – Mark Mays he received an undergraduate degree in Economics from Vanderbilt, and an MBA from Columbia University in New York City [WSJ reports in June 2010 that Mark Mays will be removed as CEO before the end of 2010]
  • Randall Mays (President/CFO) – Randall Mays got his undergraduate degree from UTexas-Austin and an MBA from Harvard.  Prior to working for Dad’s company, he worked at the Mergers and Acquisition department of Goldman Sachs [Randall stepped down in October 2009]
  • Richard Bressler, Managing Director of Thomas H Lee.  Prior to joining THL, he was Executive VP and CFO of Viacom (CBS) from 2001-2005 and has earlier ties to Time Warner Digital Media.  He joined the board in 2007.  He has a BBA degree from Adelphi University and is a CPA.
  • Charles A Brizius, Managing Director of Thomas H Lee.   He’s an accountant and Harvard MBA and joined the board in 2007 after working for Morgan Stanley
  • John P. Connaughton, Managing Director of Bain Capital.  He has a BS Degree from University of Virginia and is a Harvard MBA, and also sits on the board of Warner Music, which puts him in an interesting position on the Performance Royalty issue.  He joined the board in 2007.
  • Johnathon S. Jacobson, of Highfields Capital management.  Prior to starting his firm, he was a portfolio manager for the Harvard University Endowment.  Before that, he worked for Lehman Brothers and Merrill Lynch.  He’s a Harvard MBA and graduate of Wharton Business School.    He joined the board when the company turned private in 2008.  He is a member of a committee that works with the Federal Reserve and Treasury Department on investment issues.  [Translation:  He’s on a first name basis with Tim Geithner and Henry Paulson].
  • Ian Loring is Managing Director of Bain Capital.  He also sits on the Board of Directors of Warner Music.  He is also an MBA from Harvard and joined the board in 2007.  He had worked at one time for Drexel Burnham Lambert
  • David Abrams, Managing partner of Abrams Capital. He’s a successful stock picker from Boston in the model of Warren Buffet.  He has a B.A.  in Literature and Art from University of Pennsylvania.  If you’re playing “Which one of these is different than the others, this is the winner.  [Profile]
  • Blair Hendrix, Managing Director of Bain Capital.    He has a B.A. from Brown, and looks out of place in this list.  Maybe he picks up the rest at the airport.
  • Steven W Barnes, Managing Director of private equity firm Bain Capital.  He’s a CPA and has a B.S. degree from Syracuse University.  He came on the board in 2007
  • Scott Sperling – Co-President of Thomas Lee Partners.  He is also a director of Warner Music.  He has a BS Degree from Purdue, and an MBA from Harvard.   Prior to joining THL, we was an adviser to the Harvard Endowment Trust
  • Kent R. Weldon – Mr Weldon is a managing Doctor of Thomas H Lee.  He has a BA in Economics from Notre Dame, and an MBA from Harvard.  Prior to joining THL, he worked for…  Morgan Stanley

In summary, Clear Channel’s Board of Directors has 12 white men – at least 8 MBAs (7 from Harvard Business School), and three people on the Board of Warner Music.   It has one person who actually understands companies are run by people and not spreadsheets.

Talk about Diversity!

Financial Condition as of 2009 (10-K)

Because the company still has publicly traded debt, they are required to file reports with the SEC, even though the company is “private”.   That gives the ability to still “peek inside” what is going on at the company.  

Key Balance Sheet Items: (2009)

  • Total Assets: $18,047 Million
  • Value of Radio Station licenses:   $2,700
  • Goodwill and other intangible Assets: $7,090 *

(Some of the goodwill is related to non-radio acquisitions, but is not broken out separately)

  • Cash: $240 Million
  • Accounts Receivable: $1,431 Million (72 days of revenue)
  • Land, Buildings, Equipment (net) $3,548 Million

(A lot of those structures are Billboards and bus shelters unrelated to Radio)

Debt:

  • Current Liabilities: $1,544 million
  • Long Term Debt: $20,303 Million

Stockholder Equity: -$6,844 Million

Credit Facility / Debt

The company (as of end of 2008), has a number of pieces of debt, with different terms and different maturities.

It has about $12 Billion in Term loans, $220 million in a revolving credit line (which they drew out to the full $2 billion in February 2009), and $445 million borrowed against their receivables.

There is about an additional $7 billion in subordinated unsecured “junk quality” bonds.

Swap transactions

Clear Channel has $6 Billion interest rate swap hedges against their $13 billion in floating rate loans.  They also have a $1.1 Billion interest rate swap in the other direction that is lowering the interest rates they are paying on their fixed rate notes.

The company also had a Euro/Dollar currency swap to offset the value of their investments in European companies that will fluctuate in value due to changes in currency exchange rates.   That contract was terminated July 30 2008 when the merger was completed and not renewed.

10-k Notes / Warnings

  • Lots of people want to sue Clear Channel
  • Risk of interest rates going up or change to Euro/Dollar valuations
  • Potential regulatory changes at the FCC and Congress
  • Competition from non-Radio sources
  • Slowdown in advertising revenue
  • Risks of their cost cutting strategy
  • Interest costs go up if they fail to meet requirements of borrowing
  • Uncertainty over the future of Corporate Income tax rates
  • Counterparty risk and valuation of their Interest Rate Swaps
  • Transactions between companies – (i.e.  CC  Radio and Premiere  ads on Clear Channel Outdoor’s billboards)
  • Items 11-14 regarding Executive Compensation, equity ownership by management, transactions between the company and its officers and fees paid to the auditors were omitted from the 10-K. [We’ll tell the owners in their proxy statements  in 120 days – you non-owners mind your own business and just go away – thanks].

Profitability

All numbers in $Million 2009 2008 2007 2006 2005 2004
Revenue (Radio + Outdoor) $5,551 $6,688 $6,921 $6,567 $6,126 $6,132
License Impairment $4,118 $5,268
Operating Income (Without Impairment) $431 979 1,685 1,593 1,412 1,559
Long Term Debt Balance 2009 18,940 5,214 7,326 6,155 6,941
Debt Service Cost 1,550 928 451 484 443 367

Because some of the radio licenses were acquired directly, and some were acquired through mergers, the impairment charge is partly directly to the licenses, and partly to the “goodwill” paid to acquire companies that held licenses.   $3.6 billion was the goodwill write down.

Stock Performance

Clear Channel was one of those stocks that was splitting more often than some people change their underwear.  Stock exchanges don’t like a stock’s price to exceed $100 per share for several reasons.

The Stock Split history was: [Source]

  • 31-May-90 3 for 2 $15.00 to $10.00
  • 31-Mar-92 5 for 4 $17.50 to $14.00
  • 19-Feb-93 5 for 4 $26.88 to $21.50
  • 22-Feb-94 5 for 4 $46.00 to $36.75
  • 30-Nov-95 2 for 1 $78.88 to $40.00
  • 02-Dec-96 2 for 1 $67.50 to $33.75
  • 28-Jul-98 2 for 1 $115.00 to $57.50

So if I did my math right, each share you owned before May 1990 was 23.4375 shares when the company went private in 2008 at $36/share.

So for each share you had at $15 in 1990, it was worth $351.56 at the end of the Public Clear Channel, a gain of 2, 243%.

Up until the announcement of the merger, Clear Channel did pay cash dividends on its stock, so the overall return was even higher.

The terms of their loan prohibit paying future dividends to the Class A stock holders.   It isn’t very clear to me why anyone would own the Class A Stock.  You can’t sell it and it pays no dividend.  If the company goes into bankruptcy, you’re standing last in line.

Leave a Reply