Credit agency gung-ho on Cumulus roll-up


If you thought the Susquehanna name was confined to radio history, you obviously are not a bond trader. CMP Susquehanna Corp. is still the name on the bonds for the company known as Cumulus Media Partners – but with its announced roll-up into a much larger entity, Moody’s Investors Service has slated the credit ratings for a possible upgrade.

Even before Lew Dickey cut his deal to have Cumulus Media acquire Citadel Broadcasting he had announced an all-stock deal to have Cumulus Media acquire the part of Cumulus Media Partners that it doesn’t already own. The privately held company owns 32 stations in nine larger markets and was valued in the deal at $740 million. According to Moody’s, it had $180 million in revenues for the 12 months ending September 30, 2010.

“Moody’s believes that the potential for lower leverage, synergies and favorable diversification from the proposed acquisition improves the financial profile of Cumulus/CMP,” the ratings agency said.

Noting that the subsequent Citadel transaction includes a $500 million equity infusion by new investors, Moody’s figures the adjusted debt to EBITDA leverage for Cumulus/CMP will decrease by more than two turns from the leverage ratio of 9.5 times for CMP Susquehanna as of September 30, 2010. Thus, CMP Susquehanna’s corporate family rating, probability of default rating, senior bank credit facility (all currently Caa1) and senior subordinated notes (Caa3) have all been put under review for possible upgrade.

“The review of CMP’s ratings will focus on improvements in performance of the combined broadcasters, CMP, Cumulus, and Citadel, following the addition of numerous markets in addition to the expected deleveraging of Cumulus/CMP,” Moody’s said.

RBR-TVBR observation: You have to hand it to Lew Dickey. He saw the light at the end of the tunnel approaching last year and got Jeff Marcus at Crestview Partners to commit a half billon bucks to go shopping for radio assets at historically low multiples. That new equity from Crestview and Macquarie Capital is what has enabled Cumulus Media to put together two big acquisitions that make both the stock market and bond market happy because they actually reduce leverage and risk.