No surprise here, since Regent Communications failed to make a debt payment. So, Moody’s Investors Service has downgraded Regent’s “Probability of Default Rating” (PDR) to “D” and put its other ratings under review for a possible downgrade.
Moody’s says Regent has approximately $220 million of rated debt, including its $190 million term loan.
“There remains significant uncertainty as Regent continues to negotiate with its lenders and in Moody’s view, a bankruptcy filing cannot be ruled out if the banks do not reach a unanimous common solution and decide to accelerate their loans. Absent the professional fees and term loan amortization, we believe Regent could absorb some increase in interest pricing beyond the default interest rate,” Moody’s said of its action.
Moody’s offered some analysis of Regent’s current financial situation: “Reported debt-to-EBITDA leverage is over 9.0x and the company is consuming cash heading into a seasonally weak period. While free cash flow has been approximately breakeven in recent quarters, the term loan amortized at $1.5 million per quarter in 2009 and is scheduled to step up to $2.2 million per quarter in 2010, which will likely result in a burn of the company’s cash balance. Regent has also been incurring significant professional fees in connection with lender negotiations. Regent had $6 million of cash at 9/30/09 and, based on our view of the company’s expected performance, would run out of cash in the second quarter of 2010 if it goes current on its scheduled interest and principal payments without some combination of a modification to amortization requirements, restoration of the revolving credit facility, and flexibility under its maintenance covenants. Such changes are tantamount to either a refinancing or if the bank debt is swapped for a new facility with a reduction in principal, a debt restructuring.”