Approximately $671 of debt rated
New York, February 11, 2011 -- Moody's Investors Service is clarifying a press release issued December
08, 2010, announcing rating actions for Radio One's Credit
Facilities.
Moody's specifies that the revolver is a combination of three tranches.
Rating assigned to the revolver is as follows:
..Amended & restated $20.0 million first
lien revolver due 2012 (tranche A) -- B1, LGD2,
12%
..Amended & restated $5.1 million first
lien revolver due 2012 (tranche B) -- B1, LGD2,
12%
..Amended & restated $13.7 million first
lien revolver due 2012 (tranche C) -- B1, LGD2,
12%
Moody's Investors Service confirmed the Caa1 rating for Radio One,
Inc.'s ("Radio One") Corporate Family Rating ("CFR") and confirmed
its Caa2/LD Probability of Default Rating ("PDR"). As outlined
below, Moody's also assigned ratings to the amended/restated bank
revolver facility due 2012, amended/restated term loan due 2012,
and new senior subordinated notes due 2016 as part of the proposed note
exchange and refinancing. These actions conclude the review that
was initiated on August 18, 2010.
After several months of negotiations, Radio One succeeded in coming
to an agreement with its note holders and lenders and is expected to complete
its proposed exchange offer by issuing new senior subordinated notes to
take out its 8.875% senior subordinated notes due 2011 and
6.375% senior subordinated notes due 2013. In addition
to the note exchange, the company amended and restated its revolver
and term loan facilities. The LD designation is due to the limited
default related to a blocked August 16, 2010 interest payment on
the 6.375% senior subordinated notes as well as the pending
exchange of the these notes at less than par (95%). After
three business days from the note exchange being completed, the
limited default "/LD" designation will be removed.
Issuer: Radio One, Inc.
The following ratings were confirmed:
.. Corporate Family Rating -- confirmed Caa1
.. Probability of Default Rating -- confirmed
Caa2/LD (LD will be removed three business days after completion of the
proposed exchange)
The following rating is upgraded:
..$23.7 million first lien term loan (original
amount of $300 million) due 2012 (tranche A) -- upgraded
to B1, LGD2, 12% from B2, LGD2, 17%
The following ratings were assigned:
..Amended & restated $38.8 million first
lien revolver due 2012 (with up to $18.8 million of sub-limits)
-- B1, LGD2, 12%
..Amended & restated $323.0 million first
lien term loan due 2012 (tranche B) -- B1, LGD2,
12%
..New 12.5%/15.0% senior subordinated
Notes due 2016—Caa3, LGD4, 61%
The following ratings will be withdrawn upon closing of the transactions:
..$400 million existing senior secured revolving
facility --B2, LGD2, 17%, to be
withdrawn
..8.875% senior subordinated notes due 2011
-- Caa3, LGD6-96%, to be withdrawn
..6.375% senior subordinated notes due 2013
-- Caa3, LGD6-96%, to be withdrawn
..New second lien notes due 2016 -- B3,
LGD4, 55%, to be withdrawn
RATING RATIONALE
Upon closing of the pending transactions, the Caa1 corporate family
rating will reflect Radio One's high pro forma debt-to-EBITDA
leverage of approximately 8.0x (incorporating Moody's standard
adjustments) mitigated by improved operating performance due to expected
political advertising gains in 4Q10 followed by double digit EBITDA gains
in 1Q11 compared to a weak 1Q10. Despite expected growth in EBITDA
and improving debt-to-EBITDA leverage ratios, reported
debt balances will remain flat at approximately $655 million for
the next 12 months due to the anticipated funding of the TV One capital
call as well as the potential accretion of the PIK portion of the new
12.5%/15% subordinated notes due 2016. Incorporated
in the rating is Radio One's large market presence and niche focus targeting
the African-American audience. The company's reliance on
four of its sixteen markets for approximately half of its revenues and
up to $29 million in potential funding requirements related to
the company's ownership in TV One and Reach Media weigh on Radio One's
rating. For the nine months ended September 30, 2010,
the company reported revenues of $209 million in line with expectations
and 2% ahead of revenues for the same nine months last year.
Given the 18 month maturity of the bank credit facilities and resetting
of financial maintenance covenants with a 10-15% cushion,
Radio One is positioned to grow revenues and EBITDA which would facilitate
refinancing of bank facilities. We expect Radio One to address
refinancing of debt facilities well in advance of the 2012 maturities;
accordingly, ratings incorporate the likelihood that restrictions
under the new bank credit agreement governing liquidity, dividends,
and financial maintenance covenants will be revised.
The stable outlook assumes the closing of the exchange notes and bank
debt refinancing as well as our expectation that the company will reduce
debt-to-EBITDA ratios as economic pressures wane,
operating performance improves, and 4-5% free cash
flow is applied to reduce debt or enhance liquidity. The outlook
also reflects the expectation that the company will maintain good liquidity
and will fund the remaining $13.7 million TV One capital
call in the near term with cash and a portion of the $13.7
million revolver sub-facility provided specifically for this capital
call.
Ratings could be upgraded if the company refinances the revolver and term
loan maturing June 2012 and debt-to-EBITDA leverage ratios
are sustained below 7.0x (incorporating Moody's standard adjustments)
as a result of an improving economic environment and greater advertising
demand in combination with free cash flow being applied to reduce debt
balances. Ratings could be downgraded if revenues and EBITDA are
negatively impacted by a deeper and longer downturn in advertising spending
than expected resulting in debt-to-EBITDA leverage ratios
greater than 9.50x. Increased debt levels due to discretionary
items including, share repurchases or the funding of increasing
ownership of current investments could also negatively impact ratings,
particularly if these actions impair liquidity.
The most recent rating action for Radio One was on September 20,
2010 when Moody's repositioned Radio One Inc.'s Probability of
Default Rating (PDR) to Caa2/LD, from Caa2, following expiration
of the 30-day grace period under the indenture governing the company's
6.375% senior subordinated notes due 2013. The August
interest payment was not made in accordance with the scheduled terms,
and Moody's treats the failure to meet the original contractual terms
as a limited default. Upon closing of the proposed exchange offer,
the company will make the missed interest payment in addition to refinancing
senior subordinated notes due 2011 and 2013 with new senior subordinated
notes due 2016.
The principal methodologies used in this rating were Global Broadcast
Industry published in June 2008, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Radio One Inc. ("Radio One"), headquartered in Lanham,
Maryland, is an urban oriented multi-media company that operates
or owns interests in broadcasting stations (53 stations in 16 markets),
a cable television network, and Internet-based properties,
largely targeting the African-American audience. The Chairperson
and President (Chairperson's son) hold approximately 92% of the
outstanding voting power of the common stock. The company reported
sales of approximately $275 million through the 12 months ending
September 30, 2010.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Carl Salas
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Christina Padgett
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Carl Salas
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Correction to Text, December 08, 2010 Release: Moody's Assigns B1 Ratings to Radio One's Credit Facilities and Caa3 Rating to New Sr Sub Notes; Confirms Caa1 CFR
