The Billboard Insider Podcast
00:18:57 · Dave Westburg
[00:18:57] S0: Clearly, is probably as favorable a borrower's market as I think we've ever seen. I tell people when I'm advising them, if you get a chance to do a multi year bank deal, do it because your credit terms, your pricing is as good as it's going to get, your credit terms are as loose as they're going to get. And if you can get a two year revolver or get a term loan, lock in your funds, it's a smart thing to be doing. We've been in an up and to the right environment for ten years. There's a whole generation of lenders that have not seen a recession, and they'll panic when we get into a recession. And so to put in place a multi year lending agreement is a good thing to do now. The other thing is there's a potential if we don't go in a recession, the Federal Reserve is shrinking its balance sheet. There's going to be more demand. All the securities that the Federal Reserve was sucking up to keep interest rates low, they're going to be shrinking. There's going to be, I think, some pressure, maybe some inflationary pressure. There's going be some pressure on interest rates, and an increase in interest rates could mean lower borrowing. I think when I've looked at the math, for every 200 basis point, or 2% increase in interest rates, the debt capacity of an out of home advertising company goes down by about a half turn. In other words, if an out of home company can borrow up to five times cash flow today at today's rates, if interest rates go up by 200 basis points or 2%, the debt capacity of that same out of home company, everything else the same, is only four and a half times. So I tell people, if you can get a multi year deal, get it. Run your business. Don't take crazy risks. Run your business. Be prudent. And when I think the true opportunities will show up will be if we hit a recession when lenders pull back and money's tight, then the true opportunities will show up. That's kind of my take. John, what do you think?
00:21:00 · John Weller, Dave Westburg
[00:21:00] S1: Yeah, think that's a good point. And particularly when you're in this market where the lenders are more aggressive, just because debt's available doesn't necessarily mean you wanna take it all. Because if you get too levered and then if interest rates go up or we hit a down market, then you know, you're gonna find that you could be in a very difficult situation trying to manage that and manage in a way that's gonna keep your bankers happy as they become very conservative in a downturn. Be thankful that the debt is available, but be very careful at how much you use. [00:21:32] S0: That's a great way to finish up the podcast. That's it for this week. Thanks for appearing on the podcast, John. [00:21:39] S1: You're welcome. It was nice to be on. [00:21:41] S0: You can listen to this and other episodes of the Billboard Insider Podcast by visiting billboardinsider.com or by subscribing to the Billboard Insider Podcast on iTunes, Stitcher, or Google Play. This podcast was sponsored by billboardloans.com. Billboard Loans, fast, smart, committed. Thanks for listening, and I'll be back in two weeks.