DBRS Comments on Clear Channel Amended Merger Agreement

DBRS has today reviewed the announcement by Clear Channel Communications, Inc. (Clear Channel or the Company) that it has entered into a settlement agreement with Bain Capital Partners, LLC and Thomas H. Lee Partners, L.P.(collectively, the Private Equity Sponsors) and a bank syndicate consisting of Citigroup Inc., Deutsche Bank AG, Morgan Stanley, Credit Suisse Group, The Royal Bank of Scotland plc and Wachovia Bank, N.A. (collectively, the Banks) whereby the previously announced merger agreement has been amended for a third time and definitive long-term financing agreements have been documented.

DBRS’s BBB (low) ratings on the Senior Notes & Debentures and Revolving Credit Facility of Clear Channel remain Under Review with Negative Implications. The Company’s ratings have been Under Review with Negative Implications since October 27, 2006, following Clear Channel’s announcement that it was exploring strategic alternatives.

DBRS notes that the revised purchase price of $36.00 per share is below the original price of $37.60 per share entered into on November 16, 2006. The original agreement was strongly opposed by shareholders and was followed by two amendments, which ultimately resulted in a purchase price of $39.20 per share agreed to on May 18, 2007. DBRS also notes the current agreement contemplates definitive financing terms from the Banks, requires committed funds deposited in escrow by the Private Equity Sponsors and involves the extension of the voting agreement by the largest shareholder, which DBRS believes now greatly enhances the prospect that the deal will eventually close. However, DBRS also notes that the agreement is still subject to shareholder approval, which given proxy requirements and respective notice periods could extend a closing well into the second half of 2008.

DBRS notes that the revised agreement would reduce the Company’s total debt following the merger compared with the earlier agreements, but it is likely to still result in a leverage ratio of debt-to-EBITDA above 9.0 times for F2008. Additionally, DBRS notes that the Private Equity Sponsors have agreed to higher interest rates on the new debt in exchange for the lower purchase price, which will offset the benefit of less leverage. DBRS has previously indicated that should this level of leverage materialize, an Issuer Rating in the B range is likely to result. In a report published on May 2, 2008, DBRS identified its approach to assigning ratings and recovery prospects for each of the debt securities that DBRS expects the Company to issue (see the link to the report below).

DBRS believes the prospect of the merger closing is now more likely; however, DBRS will not draw any conclusions at this point and will maintain the ratings Under Review with Negative Implications until such time as the shareholder vote has passed and a closing is more imminent. At that time, DBRS will conclude its review and determine its new ratings.

Notes:
All figures are in U.S. dollars unless otherwise noted.