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.