Is Clear Channel Outdoor Holdings (COO) a Great Investment Choice?
CrossingBridge Advisors, an investment management firm, published its third-quarter 2022 investor letter – a copy of which can be downloaded here. The fund continues to find “money-good” bonds and leveraged loans that have attractive yields with potential for additional upside if anticipated events come to pass. On the other hand, the fund is avoiding industries that continue to struggle due to the impact of COVID. Try to spare some time to check the fund’s top 5 holdings for you to have an idea about their best stock picks this 2022.
In its Q3 2022 investor letter, CrossingBridge Advisors mentioned Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) and explained its insights for the company. Founded in 1901, Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) is a San Antonio, Texas-based out-of-home advertising company with a $533.1 million market capitalization. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) delivered a -66.16% return since the beginning of the year, while its 12-month returns are down by -64.67%. The stock closed at $1.12 per share on December 12, 2022.
Here is what CrossingBridge Advisors has to say about Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) in its Q3 2022 investor letter:
"Clear Channel International BV is a subsidiary of Clear Channel Outdoor Holdings, Inc. (NYSE:CCO), one of the largest operators of out-of-home (OOH) advertising displays in Europe and Singapore. The subsidiary is the issuer of the 6.625% first lien bonds due in August 2025. The OOH industry has benefited from the “re-opening” theme as outdoor ad spend had been impacted by COVID-19 lockdowns, although Clear Channel International revenues have only recently returned to pre-pandemic levels given longer lockdowns and greater exposure to metro ridership outside of the United States.
Short-term contracts provide frequent opportunities to reprice supply in response to inflationary pressures with the added benefit of operating leverage given a high fixed cost base. Clear Channel International generates normalized low- to mid-teens EBITDA margins with high free cash flow conversion. The company's liquidity profile and long-dated capital structure should allow it to withstand a cyclical downturn. We also appreciate the fact that these bonds are the next maturity in the structure, are secured by a first lien on certain U.K. and Nordic subsidiaries and are structurally senior to the company’s holding company debt.
With respect to potential corporate actions, management has announced their intention to sell Clear Channel’s European business with proceeds allocated towards de-leveraging. This would also be a likely precursor to conversion of parent company Clear Channel Outdoor to a REIT as these assets do not qualify for the preferential tax treatment of that structure. Thus, if the European assets are sold, it likely would result in early retirement of the bonds as the restricted payments covenants prevents the company from up-streaming asset sale proceeds to de-lever the holding company.
In 3Q22, the CrossingBridge Low Duration High Yield Fund and the CrossingBridge Responsible Credit Fund (MUTF:CBRDX) purchased Clear Channel International’s secured bonds at a weighted average yield-to-maturity of 8.94%. With the bonds callable at 101.65 beginning in on February 1, 2023, and trading at approximately 93 as of the end of 3Q22, there is potential for a much higher rate of return if the bonds are called early."
Photo by Joshua Earle on Unsplash
Our calculations show that Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) fell short and didn’t make it on our list of the 30 Most Popular Stocks Among Hedge Funds. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) was in 33 hedge fund portfolios at the end of the second quarter of 2022, compared to 32 funds in the previous quarter. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) delivered a -38.80% return in the past 3 months.
In January 2022, we also shared another hedge fund’s views on Clear Channel Outdoor Holdings, Inc. (NYSE:CCO) in another article. You can find other investor letters from hedge funds and prominent investors on our hedge fund investor letters 2022 Q3 page.
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Disclosure: None. This article is originally published at Insider Monkey.
