Moody's may cut Clear Channel rating

NEW YORK, Feb 6 (Reuters) - Moody's Investors Service on Friday said it may cut its ratings on Clear Channel Communications deeper into junk territory and also warned the company may breach its debt covenants as its radio advertising revenues decline.

Moody's said it may cut Clear Channel, which operates radio stations and outdoor advertising space, from "B2," five steps below investment grade.

"The rating action reflects Moody's concern that radio revenues in 2009 will turn out to be lower than expected and the company's cash flow could decline to levels that would weaken credit metrics and cause a breach of financial covenants," Moody's said in a statement.

"Radio industry revenues broadly appear to be pacing down in excess of 20 percent through January, and outdoor revenues appear to be trending worse than anticipated, particularly international revenues which are being adversely impacted by foreign exchange movements in addition to economic weakness," Moody's added.

The ratings review will focus on the effect the advertising slowdown will have on the company and whether Moody's believes Clear Channel will continue to be compliant in its debt covenants.

In particular, Moody's will focus on the company's ability to stay within the limits of its leverage covenant, which restricts debt relative to earnings before interest, taxes, depreciation and amortization to 9.5 times, Moody's said.

(Reporting by Karen Brettell; Editing by Diane Craft)