Clear Channel Outdoor Holdings (CCO)

Liquidity and Capital Resources

Our primary source of liquidity is cash flow from operations, which has been adversely affected by the global economic downturn. The economic downturn has resulted in a decline in advertising and marketing by our customers, resulting in a decline in our advertising revenue across our businesses. This reduction in advertising revenue has had an adverse effect on our revenue, profit margins, cash flow and liquidity. Any cash from operations in our International segment remitted to us may involve the incurrence of taxes in the U.S. and other jurisdictions. The effects of these taxes appear in our consolidated financial statements.

Another significant source of our liquidity is borrowings under our cash management arrangement with Clear Channel Communications, pursuant to which Clear Channel Communications funds our daily operating liquidity when required. Pursuant to this arrangement, we maintain collection bank accounts which are swept daily into accounts of Clear Channel Communications. In return, Clear Channel Communications funds our controlled disbursement accounts as checks or electronic payments are presented for payment. The existing day-to-day cash management arrangements with Clear Channel Communications will continue after the offering. The cash management notes representing amounts due to or from Clear Channel Communications under the cash management arrangement are scheduled to mature on August 10, 2010, but will be extended to December     , 2017 in connection with the offering.

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Our liquidity and capital resources will be significantly impacted as a result of the offering. In this regard, the amount of our indebtedness to Clear Channel Communications represented by the CCU Intercompany Note will be substantially reduced by an amount equal to the net proceeds from the offering, and the amount of our other senior indebtedness will be increased by $750 million. The CCU Intercompany Note is originally scheduled to mature on August 2, 2010, but will be extended to December       , 2017 in connection with the offering. In addition, the interest rate on the CCU Intercompany Note will be changed to the Revised CCU Intercompany Note Rate. Our cash debt service for 2009, based on the amount of indebtedness outstanding at September 30, 2009 (after giving pro forma effect to the offering), is expected to be approximately $220.9 million. The Master Agreement provides that the Company will, upon the request of Clear Channel Communications and subject to certain conditions, seek to refinance the CCU Intercompany Note with third-party financing at an interest cost calculated with reference to the yield on the notes plus any new issue adjustment.

The terms of the notes will require us to pay accrued interest on the notes daily to an account maintained by the trustee for the sole benefit of noteholders. Such daily interest payments will be made prior to any cash sweep made by Clear Channel Communications pursuant to the cash management arrangement described above. To the extent we do not generate sufficient cash to fund our required daily interest payments, we anticipate that Clear Channel Communications would fund our daily liquidity needs, including payments under the notes pursuant to the cash management arrangements, but its obligation to do so is limited to the extent of amounts due to us under the cash management note. If we are unable to make daily interest payments, it will not be a default on the notes unless we do not deposit with the trustee for the notes funds sufficient to make semi-annual interest payments when due. However, we cannot make any cash distributions to Clear Channel Communications while we are not current on our daily interest payment obligations.

The notes will require the Company to maintain at least $100 million in cash or other liquid assets or have cash available to be borrowed under committed credit facilities consisting of (i) $50.0 million at the issuer and guarantor entities (other than CCOI) (principally our domestic business) and (ii) $50.0 million at the non-guarantor subsidiaries (principally our international business) (together the “Liquidity Amount”), in each case under the sole control of the relevant entity. In the event of a bankruptcy, liquidation, dissolution, reorganization, or similar proceeding of Clear Channel Communications, for the period thereafter that is the shorter of such proceeding and 60 days, the Liquidity Amount shall be reduced to $50.0 million, with a $25.0 million requirement at the issuer and guarantor entities (other than CCOI) and a $25.0 million requirement at the non-guarantor subsidiaries. As of the consummation of the offering, the Company expects that it will not have sufficient cash, liquid assets or committed credit facilities to fund the required Liquidity Amount. Accordingly, Clear Channel Communications has indicated that it will repay a portion of the Due from Clear Channel Communications indebtedness to fund the anticipated shortfall in the initial Liquidity Amount.

As described above, Clear Channel Communications is a significant source of our liquidity. Clear Channel Communications’ primary source of liquidity is cash flow from operations, which has been adversely affected by the global economic downturn. The risks associated with Clear Channel Communications’ businesses become more acute in periods of a slowing economy or recession, which may be accompanied by a decrease in advertising on a local and national basis. Expenditures by advertisers tend to be cyclical, reflecting overall economic conditions and budgeting and buying patterns. The current global economic downturn has resulted in a decline in advertising and marketing by Clear Channel Communications’ customers, resulting in a decline in advertising revenues across its businesses. This reduction in advertising revenues has had an adverse effect on Clear Channel Communications’ revenue, profit margins, cash flow and liquidity. Consolidated revenue of Clear Channel Communications decreased $232.5 million during 2008 compared to 2007. Consolidated revenue of Clear Channel Communications decreased $1.0 billion during the nine months ended September 30, 2009 compared to the same period in the prior year. The continuation of the global

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economic downturn may continue to adversely impact Clear Channel Communications’ revenue, profit margins, cash flow and liquidity.

For a discussion of certain risks related to our liquidity and capital resources, see “Risk Factors—Risks Related to Our Relationship with Clear Channel Communications—We rely on Clear Channel Communications as a significant source of liquidity.”