Moody’s Investors Service says Citadel Broadcasting Corporation’s avoidance of payment default by making its overdue $2 million subordinated note interest payment does not impact the company’s debt ratings. In all, Citadel has about $2.1 billion of debt securities rated by Moody’s.
Moody’s last rating action on Citadel was on June 25, 2009 when it downgraded the company’s Corporate Family Rating (CFR) to Caa3 from Caa2 and its Probability of Default (PDR) to Ca from Caa3.
As noted in that earlier analysis, Moody’s believes Citadel will be “extremely challenged” to meet a January 15, 2010 deadline to have at least $150 million of available cash on hand. The ratings agency said that its basement-level ratings are based on the anticipated recovery levels for creditors, since it expects Citadel to be forced into a financial restructuring.
Citadel itself has said that a restructuring is likely, which could greatly dilute or even wipe-out stockholder equity.