Moody’s Investors Service isn’t changing its debt ratings for Cumulus Media, but has affirmed them. More importantly, the ratings service has changed its outlook for Cumulus to “stable” from “negative.”
In all, Cumulus Media has $654 million in debt rated by Moody’s.
Here is the announcement:
“Moody’s Investors Service affirmed Cumulus Media Inc.’s (“Cumulus”) Caa1 Corporate Family Rating (CFR), Caa2 Probability-of-Default Rating (PDR) and Caa1 Senior Secured Bank Debt ratings, as outlined below, and revised the company’s rating outlook to stable from negative. The stable outlook reflects Moody’s expectation that while leverage will remain very high, Cumulus’ operating performance should begin to improve over the rating horizon as economic pressures continue to gradually subside. The company is also benefitting from a restructuring of its operations which took a material level of costs out of the business, only a portion of which are expected to return as revenues increase.
Cumulus’ Caa1 CFR primarily reflects ongoing high debt-to-EBITDA leverage (9x at FYE 2009, incorporating Moody’s standard adjustments) and uncertainty surrounding the company’s ability to remain in compliance with its total leverage covenant (once reinstated in March 31, 2011).
Over the projection period, modest revenue growth and significant cost reductions (implemented in 2009) will contribute to Cumulus’ positive free cash flow generation, declining leverage and growing margins. While it will be challenging for the company to remain in compliance with the March 2011 covenant and subsequent step-downs, if performance continues to improve, the likelihood that lenders would provide another amendment without a major restructuring improves as well.
Details of the rating actions are as follows:
Cumulus Media Inc.
Corporate Family rating — affirmed Caa1
Probability of Default rating — affirmed Caa2
Senior secured revolving credit facility due 2012—affirmed Caa1 (LGD 3, 34%)
$750 million senior secured term loan due 2014 — affirmed Caa1 (LGD 3, 34%)
The rating outlook has been revised to stable from negative.”