Moody's may downgrade Radio One


1.3 billion bucks of debt at Radio One is under review by Moody’s Investors Service. Given the state of the economy and the company’s own difficulties, you’ve probably guessed that the review is aimed at a possible downgrade of Radio One’s credit ratings.

"The review is prompted by Radio One’s continued weak operating performance in the fourth quarter of 2007 due to the overall radio market decline, combined with the company’s underperformance relative to its markets. The company’s EBITDA and credit metrics were weaker than expected and the covenant compliance margin remains extremely tight," Moody’s said in a statement.

"The review will focus on the company’s operating strategy, earnings prospects and ability to reduce debt to EBITDA leverage to approximately 6.0 times over the intermediate term. The review will also assess the company’s ability to maintain or build a healthy cushion of compliance (through an amendment or otherwise) vis-a-vis the covenants and have access to adequate liquidity under its senior secured credit agreement," the ratings agency said.

Radio One, the largest Urban-focused broadcasting company, owns 54 radio stations in 17 markets and is a major partner in the TV One cable television network.

RBR/TVBR observation: Radio One CEO Al Liggins tried to be upbeat in his conference call last month. Heck, how could 2008 be any worst than 2007 was for his company, particularly in Los Angeles? It looks like 2008 is going to be a rough ride for the US economy, though, and for advertising supported businesses in particular. Some on Wall Street would like to see Liggins get more aggressive about selling stations to de-lever. But then, there’s quite a bit of inventory on the market now, so pricing is under pressure. Just what is a full-coverage LA stick worth these days?