Moody's sees positive implications in Cumulus-Citadel deal


Moody’s Investors Service had already expressed a positive view of the credit rating implications of the pending roll-up of Cumulus Media Partners into Cumulus Media. Now the even larger deal to add Citadel Broadcasting to the mix is also getting a thumbs-up from Moody’s.

“In Moody’s view, the acquisition is credit positive for Cumulus, initially reducing its leverage with an equity injection of $500 million less related transaction fees. The acquisition would also be credit positive for CMP Susquehanna Corp. as leverage would be reduced when it is folded under the Cumulus umbrella,” the rating agency said.

Under the proposed $2.4 billion transaction, shareholders of Citadel Broadcasting would receive cash or stock. The transaction would also include the refinancing of funded debt of Cumulus (approximately $600 million), CMP Susquehanna Corp. (approximately $690 million) as well as Citadel (approximately $780 million), Moody’s noted. In all, that’s $2.07 billion of refinancing.

“Moody’s placed ratings of Cumulus and CMP Susquehanna Corp. on review for potential upgrade in mid-February, and the review will consider recent improvements in the performance of the stations due to greater advertising demand, our outlook for radio broadcasting, the potential for meaningful cost savings, as well as final terms of the Citadel acquisition in combination with the acquisition of the remaining 75% interest in CMP Susquehanna Corp. that Cumulus does not already own,” stated Carl Salas, Vice President at Moody’s Investors Service.

The agency also noted that the rated debt at Citadel would likely be facing a downgrade in the transaction, but for the fact that the acquisition by Cumulus Media will trigger a change of control provision requiring the debt to be repaid when the deal closes. Thus, Moody’s plans to maintain its current ratings on Citadel’s debt and withdraw them when the transaction closes late this year.

RBR-TVBR observation: It’s all about leverage. Cumulus Media is borrowing lots of money, yes, but it is also bringing in a half billion dollars of new equity. Also, it is acquiring a less-leveraged company, Citadel, and getting the benefit of some synergy cost savings. Thus, it ends up being both bigger and less leveraged, which is what credit rating agencies like.