iHeartMedia 2012 Annual Report Download - page 103

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
100
on the amnesty payments. The Company was notified in January 2013 that the petitions to discontinue the litigation were granted and
the lawsuits filed by Klimes and L&C were dismissed effective June 1, 2012 and July 11, 2012, respectively.
Stockholder Litigation
Two derivative lawsuits were filed in March 2012 in Delaware Chancery Court by stockholders of Clear Channel Outdoor Holdings,
Inc., an indirect non-wholly owned subsidiary of Clear Channel Communications, Inc., which is, in turn, an indirect wholly owned
subsidiary of the Company. The consolidated lawsuits are captioned In re Clear Channel Outdoor Holdings, Inc. Derivative
Litigation, Consolidated Case No. 7315-CS. The complaints name as defendants certain of Clear Channel Communications, Inc.’s and
Clear Channel Outdoor Holdings, Inc.’s current and former directors and Clear Channel Communications, Inc., as well as Bain Capital
Partners, LLC and Thomas H. Lee Partners, L.P. Clear Channel Outdoor Holdings, Inc. also is named as a nominal defendant. The
complaints allege, among other things, that in December 2009 Clear Channel Communications, Inc. breached fiduciary duties to Clear
Channel Outdoor Holdings, Inc. and its stockholders by allegedly requiring Clear Channel Outdoor Holdings, Inc. to agree to amend
the terms of a revolving promissory note payable by Clear Channel Communications, Inc. to Clear Channel Outdoor Holdings, Inc. to
extend the maturity date of the note and to amend the interest rate payable on the note. According to the complaints, the terms of the
amended promissory note were unfair to Clear Channel Outdoor Holdings, Inc. because, among other things, the interest rate was
below market. The complaints further allege that Clear Channel Communications, Inc. was unjustly enriched as a result of that
transaction. The complaints also allege that the director defendants breached fiduciary duties to Clear Channel Outdoor Holdings, Inc.
in connection with that transaction and that the transaction constituted corporate waste. On April 4, 2012, the board of directors of
Clear Channel Outdoor Holdings, Inc. formed a special litigation committee consisting of independent directors (the “SLC”) to review
and investigate plaintiffs’ claims and determine the course of action that serves the best interests of Clear Channel Outdoor Holdings,
Inc. and its stockholders. On June 20, 2012, the SLC filed a motion to stay the lawsuits for six months while it completes its review
and investigation. In response, on June 27, 2012, plaintiffs filed a motion for an expedited trial, asking the Court to schedule a trial on
the merits in October 2012. On July 23, 2012, the Court issued an order granting the motion to stay and denying the motion for an
expedited trial. On January 23, 2013, the SLC filed a motion to extend the stay for thirty days, and on January 24, 2013, the Court
granted that motion, extending the stay for thirty days from the date of the order.
Los Angeles Litigation
In 2008, Summit Media, LLC, one of the Company’s competitors, sued the City of Los Angeles, Clear Channel Outdoor, Inc. and
CBS Outdoor in Los Angeles Superior Court (Case No. BS116611) challenging the validity of a Stipulated Judgment that had been
entered into in November 2006 among the parties. Pursuant to the Stipulated Judgment, Clear Channel Outdoor, Inc. had taken down
existing billboards and converted 83 existing signs from static displays to digital displays pursuant to modernization permits issued
through an administrative process of the City. The Los Angeles Superior Court ruled in January 2010 that the Stipulated Judgment
constituted an ultra vires act of the City and nullified its existence, but did not invalidate the modernization permits issued to Clear
Channel Outdoor, Inc. and CBS. All parties appealed the ruling by the Los Angeles Superior Court to Court of Appeal for the State of
California, Second Appellate District, Division 8. At an October 30, 2012 oral argument by the parties, the California Court of Appeal
read a preliminary ruling from the bench prior to the argument indicating it would uphold the Los Angeles Superior Court’s finding
that the Stipulated Judgment was ultra vires and would remand the case to the Los Angeles Superior Court for the purpose of
invalidating the permits issued to Clear Channel Outdoor, Inc. and CBS for the digital displays that were the subject of the Stipulated
Judgment. The Court of Appeal issued its written ruling in this matter on December 10, 2012, consistent with its October 30, 2012
preliminary ruling. Clear Channel Outdoor, Inc. filed a motion for rehearing on December 26, 2012. The Court of Appeal denied the
motion for rehearing. On January 22, 2013, Clear Channel Outdoor, Inc. filed a petition with the California Supreme Court requesting
its review of the matter.
NOTE 8 – GUARANTEES
As of December 31, 2012, Clear Channel had outstanding surety bonds and commercial standby letters of credit of $50.0 million and
$137.7 million, respectively, of which $70.7 million of letters of credit were cash secured. Letters of credit in the amount of
$5.0 million are collateral in support of surety bonds and these amounts would only be drawn under the letters of credit in the event
the associated surety bonds were funded and Clear Channel did not honor its reimbursement obligation to the issuers. These letters of
credit and surety bonds relate to various operational matters including insurance, bid, and performance bonds as well as other items.
As of December 31, 2012, Clear Channel had outstanding bank guarantees of $51.8 million. Bank guarantees in the amount of
$4.6 million are backed by cash collateral.