TEXT - S&P comments on Cumulus Media Inc

Mon Dec 10, 2012 11:00am EST

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Dec 10 - Standard & Poor's Ratings Services said today that Cumulus Media Inc.'s announcement that it is seeking an amendment to reduce the pricing on Cumulus Media Holdings' first-lien term loan B due 2018 does not affect our ratings on the company. Our corporate credit rating on Cumulus Media Inc. is 'B' with a stable outlook. Our issue-level rating on Cumulus Media Holdings' $1.3 billion first-lien term loan B is 'BB-', two notches above the corporate credit rating, in accordance with our notching criteria for a '1' recovery rating. The '1' recovery rating indicates our expectation for very high (90% to 100%) recovery for term loan lenders in the event of a payment default. The company is seeking to lower the interest rate on the term loan to LIBOR plus 3.5% from LIBOR plus 4.5%, and to reduce the LIBOR floor by 25 basis points, to 1%. While we view the reduced interest rate as a positive, it is only modestly beneficial to cash flow, by about $16.5 million or 4% of EBITDA per year, because of the company's very high debt burden. We believe Cumulus will maintain adequate liquidity, supported by $200 million to $250 million of funds from operations per year, despite the potential for little to no access to its revolving credit facility starting in 2013, risks surrounding longer-term secular trends in radio, and fewer opportunities to reduce expenses in 2013. Tightening covenants could limit access to the revolving credit facility in 2013. As of Sept. 30, 2012, lease-adjusted debt to EBITDA plus preferred stock was high, at 7.2x. We expect lease-adjusted debt leverage to improve to the mid- to high-6.5x area over the next year, largely because of the company's plans to continue repaying debt.

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