Clear Channel Outdoor Holdings Inc. (CCO:US) rose after Canyon Partners LLC’s Mitchell Julis said the operator of more than 750,000 advertising displays rewards shareholders as it layers on debt.
Clear Channel Outdoor increased (CCO:US) 4.8 percent to $7.59 at the close in New York, after climbing as high as $7.80. Shares have risen 8.1 percent this year.
The unit of Clear Channel Communications Inc. (CCMO:US), which has about $20 billion of debt, is structured in a way that stock investors benefit from increased leverage, Julis, co-founder of the $22 billion hedge fund based in Los Angeles, said today at the Ira Sohn conference in New York.
“Every time they lever it up, they have to declare a dividend,” said Julis, whose Canyon owned (CCO:US) more than 10 percent of the unit as of January. “So that means you get your money back.”
Clear Channel Communications, which owns and operates more than 850 broadcast radio stations, has about $10 billion of debt maturing in 2016, including $8.2 billion in term loan portions it’s seeking to extend, according to data compiled by Bloomberg.
If the company added $700 million of debt, shareholders would receive another $2 a share, Julis said.
Shira Mahler, a spokeswoman for Clear Channel, didn’t immediately return an e-mail seeking comment.
Clear Channel Outdoor agreed April 3 to declare a $200 million dividend to settle a shareholder lawsuit that challenged a $1 billion loan after an investor sued, contending its directors wrongfully approved an unsecured loan and transferred more than $600 million to the parent owned by private-equity funds Bain Capital LLC and Thomas H. Lee Partners LP.
Clear Channel Worldwide’s $1.9 billion of 7.625 percent senior subordinated bonds due March 2020 traded at 110 cents on the dollar to yield 5.829 percent as of 9:56 a.m., according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Julis founded Canyon in 1990 with Joshua Friedman, whom he met at Harvard University, and they worked for Michael Milken at Drexel Burnham Lambert Inc. in the 1980s.
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