OREANDA-NEWS. Fitch Ratings has assigned a first-time Issue Default Rating (IDR) of 'B' to Clear Channel International B.V. (CCI) with a Stable Rating Outlook and a 'BB-/RR2' issue rating to the $225 million senior unsecured notes due 2020. Fitch has also downgraded Clear Channel Worldwide Holdings' (CCWW) senior subordinated notes due 2020 to 'B-/RR5' from 'B/RR4'. A complete list of ratings follows at the end of this release.

CCI intends to use debt proceeds to indirectly fund a $220 million special cash dividend to CCWW's stockholders, including iHeartCommunication (iHeart). iHeart may use the proceeds of the dividend for general corporate purposes including to repurchase or make payments on its existing indebtedness.

CCI holds CCWW's international outdoor assets, with the exception of the CCWW's advertising operations in China. CCI is an indirect, wholly-owned subsidiary of CCWW, which itself is an indirect, wholly-owned subsidiary of Clear Channel Outdoor Holdings, Inc. (CCOH), iHeart's 90% -owned subsidiary that holds all of iHeart's outdoor businesses. The notes are guaranteed by certain of CCI's subsidiaries: pro forma for this transaction, as of Sept. 30, 2015 the guarantors comprised 45% of CCI's total assets and 86% of total liabilities. Although CCI's new notes will cross-default to CCWW's existing notes, neither CCWW nor CCOH will guarantee or otherwise assume any liability for the new notes. The 'B' rating at CCI reflects the strong parent-sub linkage due to the cross default from CCI to CCWW and the significant operational and strategic ties between the entities.

KEY RATING DRIVERS

--The ratings reflect the highly leveraged capital structure of each rated entity as of the last twelve months ended Sept. 30, 2015. Fitch estimates iHearts' pro forma total and secured leverage of 11.6x and 7.2x, respectively. iHeart's total leverage exceeds levels at the leveraged buyout, as a weak operating profile has limited EBITDA growth and FCF generation. EBITDA has not returned to pre-downturn levels.
--The ratings reflect the limited tolerance for further erosion of iHeart's operating profile and its liquidity position.
--Fitch recognizes that the company completed a series of capital market transactions which have extended a material amount of its secured maturities to 2019 and beyond, providing much needed financial flexibility.
--Fitch expects iHeart's FCF to be negative over at least the next two years reflecting the interest burden associated with the company's capital structure and operating profile.

Overall, Fitch's ratings reflect the company's highly leveraged capital structure and Fitch's expectation that the company's considerable and growing interest burden will hinder near term FCF generation. In addition, iHeart's operating profile is subject to ongoing technological threats and secular pressures in radio broadcasting along with exposure to cyclical advertising revenue. The ratings are supported by the company's leading position in both the outdoor and radio industries

KEY ASSUMPTIONS

Fitch's key assumptions within the rating case for the issuer include:

--iHeart is strongly positioned within a secularly challenged radio sector;
--CCWW is a leading global outdoor advertising company with significant geographic diversification;
--Fitch does not expect a material amount of improvement of iHeart's credit profile or absolute debt reduction over the next several years, given the expected negative FCF;
--Although iHeart has only $193 million of 2016 maturities, the company will still have to contend with maturities of approximately $900 million in 2018 and $8.3 billion in 2019.

RATING SENSITIVITIES

Negative: Cyclical or secular pressures on operating results that further weaken credit metrics or liquidity position could result in negative rating pressure. Additionally, indications that a distressed debt exchange is probable in the near term would also drive a downgrade.

Positive: Fitch's sensitivities do not currently anticipate a rating upgrade.

LIQUIDITY

Fitch regards CCI's liquidity as limited. As of Sept. 30, 2015, CCI had $53 million in cash.

Fitch regards iHeart's current liquidity as limited. As of
Sept. 30, 2015, iHeart had approximately $209.9 million in cash, excluding $172.9 million in cash held at CCOH. Backup liquidity consists of the ABL facility that matures in December 2017.

RECOVERY RATINGS (RRs)

Fitch expects a 100% recovery for CCI's new notes. However, the RR of '2' is reflective of the fact that the new notes are unsecured.

iHeart's RRs reflect Fitch's expectation that the enterprise value of the company will be maximized in a restructuring scenario (going concern), rather than a liquidation. Fitch employs a 6x distressed enterprise value multiple reflecting the value of the company's radio broadcasting licenses in top U.S. markets. Fitch assumes going-concern EBITDA at $867 million and that iHeart has maximized the debt-funded dividends from CCOH and used the proceeds to repay bank debt. In addition, Fitch assumes that iHeart would receive 90% of the value of a sale of CCOH after the CCOH creditors had been repaid. Fitch estimates the adjusted distressed enterprise valuation in restructuring to be approximately $6.2 billion.

The 'CCC/RR4' rating for the bank debt and secured notes reflect Fitch's estimate for a recovery range of 31%-50%. Fitch expects no recovery for the senior unsecured legacy notes and senior guarantee notes due to their position below the secured debt in the capital structure, and they are assigned 'RR6'. However, Fitch rates the legacy notes 'C' given the subordination to the senior guarantee notes.

CCOH's RRs also reflect Fitch's expectation that enterprise value would be maximized as a going concern. Fitch stresses outdoor EBITDA by 15%, and applies a 7x valuation multiple. Fitch estimates the enterprise value would be $4 billion. This indicates 100% recovery for the unsecured senior notes. However, Fitch notches the debt up only two notches from the IDR given the unsecured nature of the debt. In Fitch's analysis, the subordinated notes recover in the 11% to 30% 'RR5' range, resulting in one notch down from the IDR.

As of Sept. 30, 2015, iHeart had approximately $20.8 billion in consolidated debt.

Debt held at iHeart was $15.9 billion and consisted of:

--$6.3 billion secured term loans due 2019;
--$190 million secured receivable based credit facility due 2017;
--$6.3 billion secured PGNs, maturing 2019-2023;
--$1.7 billion in senior unsecured 12% cash pay / 2% PIK notes maturing in February 2021;
--$730 million senior unsecured 10% notes due 2018 (net of FinCo holdings of $120 million);
--$668 million senior unsecured legacy notes, with maturities of 2016-2027 (net of FinCo holdings of $57 million.)

Debt held at CCWW was $4.9 billion and consisted of:

--$2.7 billion in senior unsecured 6.5% notes due 2022;
--$2.2 billion in subordinated 7.625% notes due 2020.

Fitch has assigned the following ratings:

Clear Channel International B.V.
--Long-term IDR at 'B';
--Senior unsecured notes at 'BB-/RR2';

The Rating Outlook for Clear Channel International B.V. is Stable.

Fitch has taken the following rating actions:

Clear Channel Worldwide Holdings, Inc.
--Senior subordinated notes downgraded to 'B-/RR5' from 'B/RR4'

Fitch currently rates iHeart as follows:

iHeartCommunications, Inc.
--Long-term IDR at 'CCC';
--Senior secured term loans at 'CCC/RR4';
--Senior secured priority guarantee notes at 'CCC/RR4';
--Senior unsecured guarantee notes due 2021 at 'CC/RR6';
--Senior unsecured legacy notes at 'C/RR6'.

Clear Channel Worldwide Holdings, Inc.
--Long-term IDR at 'B';
--Senior unsecured notes at 'BB-/RR2';

The Rating Outlook for Clear Channel Worldwide Holdings, Inc. is Stable.