NEW YORK (
) -- Ryan Seacrest's $300 million
private equity score
may act more like a new funding round for debt-laden
than an investment in new media ventures run by the America Idol host.
Thomas H. Lee Partners
-- both big financial backers of the broadcaster -- are funding the deal to bring in mega-profitable Searcrest productions like "Keeping Up With the Kardashians" that can act as a savior for the long suffering Clear Channel investors.
| Can Ryan Seacrest Save Clear Channel?
At the height of the credit boom, THL and Bain Capital spent $17.9 billion to buy Clear Channel, which has a 89% ownership of
Clear Channel Outdoor Holdings
(CCO - Get Report)
, in a deal that's since yielded billions in losses. With a partial ownership in Ryan Seacrest Productions and the $300 million it has to invest, Clear Channel and its private equity owners may be hoping that Seacrest can instruct high returning media investments and help the company fix its finances by 2014, when a daunting $4 billion in debt comes due.
In a January 30 report, Moody's Investor Service said that Clear Channel has $16.5 billion in debt coming due by 2016, the largest debt stock of any company with a rating of B3 or lower [a highly speculative rating] in that time. The agency gives Clear Channel bonds a junk Caa2 rating that indicates very high credit risk.
"Many of these companies will face challenges refinancing their debt, especially if their capital structures are untenable and if business fundamentals do not improve," wrote Moody's Investor Service analysts Kevin Cassidy and Tiina Siilaberg in the note. In 2012, Clear Channel's debts are manageable, notes Moody's and Standard & Poor's.
The investment by Clear Channel and the private equity investors adds to their collaboration with Seacrest, who hosts "On Air With Ryan Seacrest" and "American Top 40," both carried on Clear Channel radio stations. With the $300 million in funds, Seacrest is looking to add to his successful cable programming and a newly created joint venture with Mark Cuban-owned HDNet, AEG and talent agency-CAA. But the deal may also represent a significant equity push by Clear Channel's owners to shift the company's income statement toward growth Web media businesses ahead of its debt maturities.