Westwood One reworks debt covenants, business improving


Westwood One has gotten some covenant relief from its lenders, which will give the company more financial flexibility in 2010. Meanwhile, CEO Rod Sherwood told analysts in his quarterly conference call that Q1 pacings are up, so revenues should be up year over year. However, he’s not saying how much.

The ink was still drying on the signatures Tuesday when WW1 reported the new deal with its lenders. “These new covenant levels will provide us with a significant increase in our operational and financial flexibility and reduce financial risk,” Sherwood told the analysts. The main provisions will change the debt-to-EBITDA ratio for the end of 2010 to 6.5 times from the previously planned 4.5 times. That will reduce the EBITDA requirement by about $10 million to $17.6 million this year. Due to last year’s financial restructuring of the company and cost cutting efforts, 2010 will not be directly comparable to 2009, when reported EBITDA for the full year was only $10.4 million, down from $39.2 million in 2008. However, the company noted that adjusted EBITDA for the final three quarters of 2009 was $17.3 million.

The EBITDA ratio goes to 4.5 times at the end of 2011, so the covenant terms were essentially extended by one year in the amendment signed on Tuesday.

“Throughout the year I’ve been reporting on Westwood One’s turnaround,” Sherwood said of 2009. “Finally in the fourth quarter I believe we accomplished the goals we set out to achieve in 2009. We realigned our capital structure, reduced our operating costs by approximately $60 million on an annual basis and invested in areas of the business with the most potential to grow our revenue in 2010 and beyond.”

After reporting Q4 results that saw revenues still down by 8.7%, but better than any other quarter of 2009, WW1 is on track for improvement in 2010.

“In network radio, our first quarter upfront advertising bookings are up significantly, compared to the first quarter of 2009. Network radio and Metro Traffic are showing increases in upfront bookings for the total year, compared to total year bookings at this time last year. We have also seen increases in the key categories of retail, automotive, insurance, quick service restaurants and consumer goods,” Sherwood said. “No one is expecting the radio industry to rebound quickly or steeply. In fact, industry analysts use words like ‘slow but welcome growth’ to express their cautious predictions. However, because of our efforts to stabilize Westwood One over the last year, Westwood One is well positioned to participate in this industry recovery,” Sherwood said. 

RBR-TVBR observation: It is always good to keep the lines of communications open and have good relations with your bankers. WW1 had to go through a financial restructuring in the midst of a terrible recession, so having some covenant breathing room should let it focus on making smart business decisions as the recovery accelerates, instead of having to dwell exclusively on holding costs down.