Credit markets tightening as Cumulus sells debt


For some months now we’ve been writing about the red hot market for media company debt. But that’s been changing – just as Cumulus Media goes to market with $2 billion of senior debt for its dual acquisitions of Cumulus Media Partners and Citadel Broadcasting.

The Wall Street Journal first reported that the lead lenders, JP Morgan, UBS, Macquarie Capital and RBC Capital Markets, were having difficulties syndicating the senior debt deal. That could leave the four institutions holding more of the loan package in their own portfolios than they had anticipated.

What happened? Wells Fargo Securities high-yield debt analyst Bishop Cheen told RBR-TVBR that the landscape has been changing.

“April 13 our Media Loan Index was 5.81%, but as of yesterday [6/29], it had backed up 29 bps [basis points] to 6.1%,” Cheen said. And that’s a big move in the banking world.

The current market conditions aren’t related to Cumulus, the radio business or the specifics of two other non-media businesses cited in the WSJ report has encountering difficulties with loan syndication.
“I would say it is due to macro market headwinds – they are not helping due to Greece, stalled domestic budget negotiations, and a general consensus by economists of a less robust economy in the 2nd half of 2011 than had been envisioned in early Q1,” Cheen explained..   

RBR-TVBR observation: As we noted in April, Cumulus only sold $610 million in bonds for its total financing of the CMP and Citadel deals because the banks were so anxious to provide most of the financing. The bond market would have willingly taken a lot bigger chunk. But that was then and this is now – and the debt markets have changed from spring to summer.

The $2 billion senior loan will still get done, but JP Morgan, UBS, Macquarie and RBC may be regretting that they pushed for that big of a portion of the total package.

Related report: Cumulus sets shareholders vote RBR-TVBR observation