MOODY'S CONFIRMS RATINGS OF AMERICAN RADIO SYSTEMS
NEW YORK, 6/21/1996 -- Moody's confirmed American Radio Systems' Ba2 rating of its $300 million secured bank facility and the B2 rating of its $175 million of 10% senior subordinated notes. The outlook remains positive. The confirmation incorporates acquisitions the company has announced in 1996 totaling over $430 million, as well as the $125 million of convertible exchangeable preferred stock recently raised in a private placement.
The ratings reflect concerns that the company will continue to aggressively acquire stations and potentially releverage its balance sheet, as well as the expectation that it will make significant investments in a subsidiary set up to own and lease towers.
However, the ratings are supported by the company's dominant position in most of its markets; the significant amount of equity the company has raised over the past 12 months to finance acquisitions; and the strengthened cash flow and geographic diversification resulting from the new stations.
The positive outlook reflects Moody's belief that American Radio will be able to take advantage of the new deregulatory environment for radio that is forming in its upper mid-size markets. Its strategy of acquiring up to eight stations in each of its markets to gain a dominant share will allow it to have increased rate stability while offering advertisers a variety of complimentary formats to reach a range of target demographics. The company should also successfully realize cost savings through elimination of duplicative overhead.
Proceeds from the preferred stock offering, together with drawdowns under the bank facility, will pay for the pending acquisitions. The company will have over $200 million available, pro-forma for pending acquisitions and the preferred offering, under the facility for future acquisitions.
Following the pending acquisitions, as well as several small dispositions and station swaps, American Radio will own 62 stations in 14 markets. It will rank first or second in market revenue share in 12 of its markets, including particularly strong shares of Hartford, Connecticut; Buffalo, New York; Rochester, New York; and Dayton, Ohio. Whereas the existing station group was located mostly in the eastern U.S., the acquisitions will bring the company to six new markets primarily in the western U.S.: Las Vegas, Nevada; San Jose, Sacramento, and Fresno, California; Portland, Oregon; and Omaha, Nebraska.
Moody's expects American Radio to stay in most of its markets, looking selectively to increase its share in markets where it has a relatively strong position, and disposing or swapping stations in the few markets where it is not a market leader. Moody's also expects the company to enter additional markets that are similar in size and market growth as its existing markets.
The ratings will be constrained near-term by the uncertainty of the company's acquisition and financing activities. As the company demonstrates its ability to improve ratings and cash flows of its acquired stations and the acquisition risk moderates, an upgrade may be warranted.
American Radio is one of the largest radio groups in the U.S. The company is headquartered in Boston, Massachusetts.
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