The parade of radio company downgrades by Moody’s Investors Service continues. You can add Regent Communications to the list of companies who have seen their debt ratings cut by Moody’s. The saving grace, if there is one, is that Moody’s says Regent has been performing better than its peers. The ratings downgrades affect about $240 million of debt at Regent.
Here’s what the ratings agency had to say:
“Moody’s Investors Service downgraded Regent Broadcasting LLC’s corporate family rating to B3 from B2, probability of default rating to Caa1 from B3, and speculative grade liquidity rating to SGL-4 from SGL-3. Moody’s expects radio broadcasting revenues, which are highly reliant on cyclical advertising, to come under increasing pressure due to the slowdown in consumer spending, its impact on corporate profits, and the resulting cutbacks in advertising and marketing budgets by several industries. Despite these concerns with the radio broadcasting industry, Regent has performed better than its rated peers and Moody’s expects that this trend could persist through the advertising downturn in part due to its strong market positions and below average exposure to the automotive industry. The depth and severity of the expected decline nevertheless exceeds the cyclicality built into the B2 corporate family rating. Moody’s expects that mid to high single digit revenue declines will likely pressure Regent’s ability to maintain adjusted leverage in the low 7 times range as assumed by the prior B2 rating.
The SGL-4 reflects concern over Regent’s ability to comply with tightening financial covenants under its bank credit facility. The recent negative events in the U.S. financial markets and their impact on the availability of credit could hamper Regent’s ability to remedy potential covenant problems. The stable outlook is highly susceptible to greater than expected revenue declines and is predicated on the maintenance of sufficient liquidity on a quarterly basis throughout the near term.
The B3 corporate family rating reflects Regent’s significant leverage (approximately 7 times debt-to-EBITDA), concern over its ability to comply with financial covenants, and the maturity and inherent cyclicality of the radio industry. Regent’s local market focus and presence in more stable mid-sized markets, diverse revenue mix, favorable geographic coverage, and expected positive free cash flow support the ratings.
Today’s ratings actions were as follows:
Regent Broadcasting LLC
….Corporate Family Rating, Downgraded to B3 from B2
….Probability of Default Rating, Downgraded to Caa1 from B3
….Speculative Grade Liquidity Rating, Downgraded to SGL-4 from SGL-3
….Senior Secured Bank Credit Facility , Downgraded to B3, LGD3, 35% from B2, LGD3, 35%
Moody’s last rating action for Regent was in November 2007, when the company was downgraded to B2 from B1.
Regent Broadcasting LLC owns and operates 62 stations located in 13 markets.”