S&P Lowers The Outlook On Radio One To 'Negative'
December 1, 2011 at 3:55 AM (PT)
STANDARD & POOR'S Ratings Services has revised its rating outlook on RADIO ONE INC. to negative from stable, moving the company to a B- corporate rating.
S&P wrote, "We believe RADIO ONE could be at risk of violating its financial covenants in the first half of 2012 if operating performance of its radio segment doesn't improve early next year. The company has only a thin cushion ofcompliance with its senior debt leverage and total debt leverage financial covenants, which tighten next year."
Specifically, S&P is concerned that "the company's ratio of actual senior debt to EBITDA (per bank calculations) was 4.59x as of SEPTEMBER 30, 2011, against a 5.0x financial covenant, with impending step-downs to 4.75x in the first quarter of 2012 and to 4.5x in the second. Its ratio of actual total debt to EBITDA (per bank calculations) was 8.37x as of SEPTEMBER 30, 2011, against a 9.25x financial covenant, which steps down to 9.0x on March 31, 2012; 8.75x on June 30, 2012; and 8.50x on Sept. 30, 2012."
"In addition" writes S&P, "we expect RADIO ONE's discretionary cash flow to decline in 2012 and 2013 because of required higher cash interest payments on the company's 12.5%/15% senior subordinated notes beginning MAY 15, 2012, which creates roughly $20 million of additional cash interest expense on a annual basis."