Cumulus gains revolver access and an upgrade


CumulusRadio giant Cumulus Media waved its financial wand and made its revolver more accessible and earned a Speculative Grade Liquidity upgrade from Moody’s Investor Service. Moody’s also noted some progress on the operational front.

The move was a first lien credit amendment that reduces the group’s revolver commitment from $300M to $150M and unlocks full access to the revolver. Moody’s upgraded it from SGL-3 to SGL-2 as a result. Its Corporate Family Rating remains at B2 and its outlook remains stable.

Leverage is at 7.3x, which is elevated beyond the comfort zone, and was not helped by recent revenue shortfalls. According to Moody’s, one problem was that Cumulus was tied to barter deals inherited during its acquisition of Citadel stations; another was ongoing turmoil in the company’s syndie talk business.

Revenue is expected to be flat by year’s end, and its free cash flow projection has been knocked down by $25M Moody’s to $175M based on promised investments in CBS Sports Radio, its new Nash FM effort and other projects.

On the plus side, four of the ten trouble Citadel stations that have been carrying the blame for many of the group’s revenue challenges are said to have been successfully restored to health.

Said Moody’s analyst Carl Salas, “The revised SGL-2 liquidity rating reflects good liquidity due to the amendment of the 1st lien credit agreement. Previously Cumulus had limited access to the revolver commitment given reported total net leverage ratios in excess of the 6.50x test for March 31, 2013. The amendment replaces the restrictive total net leverage ratio covenant with a 1st lien net leverage test of 4.50x for June 30, 2013 which step downs by 0.25x increments to 3.75x by the end of 2014. Moody’s believes Cumulus will have full access to the revolver facility given estimated 1st lien leverage of roughly 3.2x based on reported results for LTM March 31, 2013. We expect the company to maintain a minimum EBITDA cushion of 25% over the next 12-18 months. We note this financial maintenance covenant will continue to be measured only if there are advances under the revolver commitment. Liquidity is also supported by more than $5 million of balance sheet cash plus positive annual free cash flow.”

RBR-TVBR observation: Both of radio’s two huge companies have been dealing with elevated debt related to expensive transactions that ran into severe economic headwinds. Neither have access to a quick fix – a Hail Mary pass is out of the question – but both seem to be doing a good job of going for first downs and extending the playing field as necessary.

Unfortunately the biggest threat to this ball-control offense is another round of severe economic headwinds, and the onset of something like that is beyond their control.

At the moment, it looks like clear sailing for the time being – and the fact that Cumulus is starting to make headway with its group of terrible ten Citadel stations vastly improves its prospects for success.