iHeartMedia 2002 Annual Report Download - page 54

Guarantees of Third Party Obligations
As of December 31, 2002 and 2001, we guaranteed the debt of third parties of approximately $98.6 million and $225.2 million, respectively,
primarily related to long-term operating contracts. The third parties’associated operating assets secure a substantial portion of these
obligations.
At December 31, 2002, we guaranteed the third-party performance under a certain contract for approximately $77.4 million that expires in
2004.
Common Stock Warrants
We assumed common stock warrants, with an expiration date of February 27, 2002, as a part of our merger with Jacor. Each warrant
represented the right to purchase .130441 shares of our common stock at an exercise price of $34.56 per full share. During the first quarter of
2002, we received $11.8 million in proceeds and issued .3 million shares of common stock on the exercise of these warrants.
Sale of Investments
During 2002, we liquidated our position in Entravision Corporation, which we acquired in the AMFM merger. As a result of the sale, we
received $11.8 million in proceeds and recorded a gain of $4.0 million, which is recorded in gain on sale of assets related to mergers. Also
during 2002, we sold our interest in a British radio license and various media companies. As a result of these sales, we received $31.4 million
in proceeds and recorded a gain of $19.4 million, which was recorded in “Other income (expense) –net”, and a gain of $4.7 million recorded in
“Gain (loss) on marketable securities”.
Shelf Registration
On March 29, 2002, we filed a Registration Statement on Form S-3 covering a combined $3.0 billion of debt securities, junior subordinated
debt securities, preferred stock, common stock, warrants, stock purchase contracts and stock purchase units (the “shelf registration statement”).
The shelf registration statement also covers preferred securities that may be issued from time to time by our three Delaware statutory business
trusts and guarantees of such preferred securities by us. The SEC declared this shelf registration statement effective on April 2, 2002.
On January 6, 2003, we completed a debt offering of $300.0 million 4.625% notes due January 15, 2008 and $500.0 million 5.75% notes
due January 15, 2013. Interest is payable on January 15 and July 15 on both series of notes. The aggregate net proceeds of approximately
$791.2 million were used to repay borrowings outstanding under our bank credit facilities and to finance the redemption of AMFM Operating,
Inc.’s outstanding 8.125 % senior subordinated notes due December 15, 2007 and 8.75% senior subordinated notes due June 15, 2007. The
AMFM notes were redeemed pursuant to call provisions in the indentures.
Debt Covenants
Our most significant covenants relate to leverage ratio and interest coverage contained and defined in the credit facilities. The leverage ratio
covenant requires us to maintain a ratio of total debt to EBITDA (both defined by the credit facilities) of less than 5.50x through June 30, 2003
and less than 5.00x from July 1, 2003 through the maturity of the facilities. The interest coverage covenant requires us to maintain a minimum
ratio of EBITDA (as defined by the credit facilities) to interest expense of 2.00x. In the event that we do not meet these covenants, we are
considered to be in default on the credit facilities at which time the credit facilities may become immediately due. At December 31, 2002, our
leverage and interest coverage ratios were 4.0x and 4.95x, respectively. Including our cash and cash equivalents recorded at December 31,
2002, our leverage on a net debt basis was 3.9x. Our bank credit facilities have cross-default provisions among the bank facilities only. No
other Clear Channel debt agreements have cross-default or cross-acceleration provisions.
Additionally, the AMFM long-term bonds contain certain restrictive covenants that limit the ability of AMFM Operating Inc., a wholly-
owned subsidiary of Clear Channel, to incur additional indebtedness, enter into
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