Following its exit from Chapter 11 reorganization, Citadel Broadcasting has gotten a debt rating from Moody’s Investors Service which, while in junk bond territory, is only two notches below investment grade. The Moody’s ratings cover approximately $763 million of debt.
Moody’s announced that it had assigned Citadel Broadcasting Corporation a Ba2 Corporate Family rating (CFR), a Ba3 Probability of Default rating and a Speculative Grade Liquidity rating (SGL) of SGL-2. Moody’s also assigned a Ba2 rating to the company’s $762.5 million senior secured term loan due 06/03/2015.
“The ratings were assigned in conjunction with the company’s emergence from Chapter 11 in June 2010. As part of the reorganization, about $1.4 billion of indebtedness was extinguished, and the senior secured lenders exchanged their debt for the new $762.5 million term loan and 90% of the company’s common stock. The rating outlook is stable,” Moody’s noted.
“The Ba2 CFR reflects the company’s moderate post-emergence debt-to-EBITDA ratio of 3.9x (pro-forma as of 3/31/2010 and incorporating Moody’s standard adjustments) and Moody’s expectation that over the intermediate term, Citadel will apply free cash flow towards debt repayment in order to strengthen its balance sheet and sustain financial leverage in the low 3.0x range (including Moody’s standard adjustments). Citadel’s ratings also reflect its significant exposure to cyclical advertising spending as evidenced by the company’s steep revenue decline during the recession,” the rating statement said.
“The rating factors the company’s strong EBITDA margins in the 30% range and significant cash flow generated from a well-clustered radio station portfolio that is diversified by programming formats, geographic regions, audience demographics and advertising clients. In Moody’s opinion, Citadel’s experienced management team and its commitment to prudent financial policies, including disciplined allocation of some of its cash generation towards debt reduction, in addition to acquisitions and shareholder returns, provide incremental support to the company’s ratings,” said Moody’s.
As for the “stable” outlook, Moody’s said it expects that Citadel will use free cash flow to reduce debt and leverage to about 3.3x over the next 12 months. “While visibility regarding economic conditions in 2011 remains fairly limited at this point, the outlook assumes that the company will maintain a good liquidity profile, that will provide it sufficient financial flexibility to manage through a double-dip recession, should the economy again falter,” Moody’s noted.
Here are the ratings actions:
..Issuer: Citadel Broadcasting Corporation
….Corporate Family Rating, Assigned Ba2
….Probability of Default Rating, Assigned Ba3
….Senior Secured Bank Credit Facility, Assigned Ba2, LGD3-33%
….Speculative Grade Liquidity Rating, Assigned SGL-2
The rating outlook is stable
