Moody’s considering downgrades for two radio companies


Radio One and Cumulus Media are on the hot seat. Moody’s Investors Service has placed both companies under review for possible downgrades of their credit ratings. The ratings company’s concerns, though, apply to pretty much all radio companies. The outlook for the radio business, according to Moody’s, is pretty dismal.

“Today’s rating actions were prompted by our heightened concerns that the radio broadcasting sector will likely face significant revenue and cash flow deterioration due to the high probability of further deterioration in the U.S. economy and its impact on advertising revenue.

Moody’s expects radio broadcasting revenues, which are highly reliant on cyclical advertising, to come under increasing pressure due to the slowdown in consumer spending, its adverse impact on corporate profits and the resulting cutbacks in advertising and marketing budgets by several industries. Moody’s notes that the primarily fixed cost base of most radio broadcasting companies offers only limited avenues to reduce costs in a downturn. As a result, risks associated with sharp revenue declines due to curtailments in advertising budgets appear to far outweigh any potential benefits from cost cuts implemented in an attempt to mitigate the pressure.

Moody’s expects the resultant cash flow declines to pressure fundamental credit metrics, erode headroom under financial maintenance covenants and cause liquidity pressure. While the sale of assets can provide broadcasters with additional liquidity, in our view, a sale of stations may be difficult and may take longer to execute due to the current adverse credit environment and lack of financing availability. Reduced access to capital markets will also make it challenging for companies to refinance debt, raise additional funding and remedy covenant (actual or potential) problems” Moody’s said.

RBR/TVBR observation: You can’t change the economy – and it remains to be seen whether the winner of today’s election can. So make sure you have the basics right – the right programming for your local audience and hard working, well trained sales people on the street – and then start looking for some creative new ideas. Try something. If it works, keep doing it – and let us know so your fellow broadcasters can benefit as well, at [email protected]

Last, if you have yet to start on your website do it now and make your web the new value added tool which will produce more opportunity for expansion and revenues. Think we are kidding at RBR?  Then view because this site did not exist this time last year. Now there is consistent content with video and is viewed around the world. Get involved with the internet and prove Moody’s wrong.