Moody’s Investors Service said that Citadel Broadcasting Corporation’s discussions with its lenders, including the possibility of seeking relief through a Chapter 11 filing in federal bankruptcy court, does not have any impact on the company’s debt ratings. The likelihood of a restructuring or bankruptcy had already been taken into account by Moody’s.
“The ongoing weakness in the economy and advertising spending, compounded by rising debt and leverage due to the bank facility’s PIK interest (resulted from a recent amendment to the facility), and the expected inability to meet loan covenant requirements as soon as January 2010, has left Citadel with an unsustainable capital structure,” stated Neil Begley, a Moody’s Senior Vice President.
As noted when Moody’s cut its ratings for Citadel in June, the ratings which have been in effect since then incorporated an elevated risk of default.
In the event of a bankruptcy filing or some other form of wholesale restructuring and default on the company’s obligations, Moody’s said it would downgrade Citadel’s Probability of Default Rating to D from Ca and affirm the company’s instrument ratings.