iHeartMedia 2012 Annual Report Download - page 25

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business and other factors beyond our control. In addition, because we derive a substantial portion of our operating income from our
subsidiaries, our ability to repay our debt depends upon the performance of our subsidiaries, their ability to dividend or distribute
funds to us and our receipt of funds under our cash management arrangement with our subsidiary, Clear Channel Outdoor Holdings.
We and our subsidiaries may not be able to maintain a level of cash flows sufficient to permit us and our subsidiaries to pay the
principal, premium, if any, and interest on our respective indebtedness.
If our and our subsidiaries’ cash flows and capital resources are insufficient to fund our respective debt service obligations,
we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance
our indebtedness. We may not be able to take any of these actions, and these actions may not be successful or permit us to meet the
scheduled debt service obligations. Furthermore, these actions may not be permitted under the terms of existing or future debt
agreements.
The ability to restructure or refinance the debt will depend on the condition of the capital markets and our financial condition
at such time. Any refinancing of our debt could be at higher interest rates and increase debt service obligations and may require us and
our subsidiaries to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or
future debt instruments may restrict us from adopting some of these alternatives. These alternative measures may not be successful
and may not permit us or our subsidiaries to meet scheduled debt service obligations. If we and our subsidiaries cannot make
scheduled payments on indebtedness, we or our subsidiaries, as applicable, will be in default under one or more of the debt agreements
and, as a result we could be forced into bankruptcy or liquidation.
Because we derive a substantial portion of operating income from our subsidiaries, our ability to repay our debt depends upon the
performance of our subsidiaries and their ability to dividend or distribute funds to us.
We derive a substantial portion of operating income from our subsidiaries. As a result, our cash flow and the ability to service
our indebtedness depend on the performance of our subsidiaries and the ability of those entities to distribute funds to us. We cannot
assure you that our subsidiaries will be able to, or be permitted to, pay to us the amounts necessary to service our debt.
The documents governing our indebtedness contain restrictions that limit our flexibility in operating our business
Our material financing agreements, including our credit agreements and indentures, contain various covenants restricting,
among other things, our ability to:
make acquisitions or investments;
make loans or otherwise extend credit to others;
incur indebtedness or issue shares or guarantees;
create liens;
enter into transactions with affiliates;
sell, lease, transfer or dispose of assets;
merge or consolidate with other companies; and
make a substantial change to the general nature of our business.
In addition, under our senior secured credit facilities, we are required to comply with certain affirmative covenants and
certain specified financial covenants and ratios. For instance, our senior secured credit facilities require us to comply on a quarterly
basis with a financial covenant limiting the ratio of our consolidated secured debt, net of cash and cash equivalents, to our
consolidated EBITDA (as defined under the terms of our senior secured credit facilities) for the preceding four quarters. The ratio
under this financial covenant for the four quarters ended December 31, 2012 is set at 9.5 to 1 and reduces to 9.25 to 1, 9 to 1 and
8.75 to 1 for the quarters ended June 30, 2013, December 31, 2013 and December 31, 2014, respectively.
The restrictions contained in our credit agreements and indentures could affect our ability to operate our business and may
limit our ability to react to market conditions or take advantage of potential business opportunities as they arise. For example, such
restrictions could adversely affect our ability to finance our operations, make strategic acquisitions, investments or alliances,
restructure our organization or finance our capital needs. Additionally, our ability to comply with these covenants and restrictions
may be affected by events beyond our control. These include prevailing economic, financial and industry conditions. If we breach
any of these covenants or restrictions, we could be in default under the agreements governing our indebtedness and, as a result, we
would be forced into bankruptcy or liquidation.