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26 Nov 2010
Approximately $763 million of debt affected
New York, November 26, 2010 -- Moody's Investors Service assigned Citadel Broadcasting Corporation's
("Citadel") proposed $400 million senior secured first-lien
credit facilities a Baa3 rating, and its proposed $500 million
senior unsecured notes a Ba3 rating. Citadel plans to utilize the
net proceeds along with cash on hand to refinance its existing term loan.
Since the company will move from an all-bank debt capital structure
to a bank-and-bond structure, Moody's changed
the company's Probability of Default Rating (PDR) to Ba2 from Ba3
to reflect the lower probability of default present in such hybrid debt
structures. The company's existing Ba2 Corporate Family Rating
(CFR) is not affected. The Speculative Grade Rating remains SGL-2
and the rating outlook remains stable.
The following is a summary of today's actions:
..Issuer: Citadel Broadcasting Corporation
....Probability of Default Rating, Upgraded
to Ba2 from Ba3
..Issuer: Citadel Broadcasting Corporation
....Senior Secured Revolving Credit Facility,
Assigned Baa3, LGD2 - 15%
....Senior Secured Term Loan Facility,
Assigned Baa3, LGD2 - 15%
....Senior Unsecured Notes, Assigned
Ba3, LGD5 - 71%
The proposed senior secured credit facility consists of a $150
million 3-year revolver and a $250 million 6-year
term loan B. The Baa3 rating on the facility reflects its senior
most position in the capital structure and benefits of the collateral
package, which includes a first priority lien on all the assets
and stock of domestic subsidiaries and 65% of capital stock of
foreign subsidiaries. The rating also reflects the cushion provided
by the senior unsecured notes which make up the majority of the debt structure.
The terms of credit facility include an excess cash flow sweep of 50%
if secured leverage exceeds 1.0x and total leverage exceeds 3.0x.
The proposed senior unsecured notes have an 8-year tenor and are
guaranteed by material domestic subsidiaries. The Ba3 rating on
the notes reflects their lower rank in the capital structure and that
they are unsecured. The notes benefit however, from guarantees
from Citadel's operating subsidiaries.
The Ba2 CFR reflects the company's moderate post-emergence debt-to-EBITDA
ratio of around 3.6x as of 9/30/10 (incorporating Moody's standard
adjustments) and Moody's expectation that over the intermediate term,
Citadel will apply free cash flow towards debt repayment in order to strengthen
its balance sheet and sustain financial leverage in the low 3.0x
range (including Moody's standard adjustments). Citadel's ratings
also reflect its significant exposure to cyclical advertising spending
as evidenced by the company's steep revenue decline during the 2009 recession.
The rating considers the company's strong EBITDA margins, in the
30% range, and significant cash flow generated from a well-clustered
radio station portfolio that is diversified by programming formats,
geographic regions, audience demographics and advertising clients.
In Moody's opinion, Citadel's experienced management team and its
commitment to prudent financial policies, including an expected
balanced allocation of some of its cash generation towards debt reduction,
in addition to acquisitions and shareholder returns, provide incremental
support to the company's ratings.
The SGL-2 rating incorporates our expectation that Citadel will
maintain a good liquidity position over the next twelve months.
Internal sources of liquidity include cash on hand and projected free
cash flow of over $100 million per year, which together provide
ample liquidity to cover the company's operating cash needs and
$2.5 million of annual term loan amortization. Moody's
anticipates that there will be more than adequate cushion under the company's
leverage and interest coverage tests and that the company will remain
in compliance with financial covenants over the next twelve to eighteen
The stable outlook reflects our view that Citadel will use free cash flow
to reduce debt and leverage to about 3.3x (Moody's standard adjustments
add about 0.3x to the company's reported leverage ratio) over the
next 12 months. While visibility regarding economic conditions
in 2011 remains fairly limited at this point, the outlook assumes
that the company will maintain a good liquidity profile that will provide
it sufficient financial flexibility to manage through a double-dip
recession, should the economy again falter.
What Could Change the Rating - Up
The ratings could face upward pressure if Citadel demonstrates both the
ability and willingness to reduce absolute debt to around $600
million or less, and sustain debt-to-EBITDA at or
under 2.75x (with Moody's standard adjustments). An upgrade
would also require a long-term commitment from management to maintain
a conservative balance sheet at these levels and balance creditor and
shareholder interests in a prudent manner.
What Could Change the Rating - Down
Debt-to-EBITDA leverage sustained above 4.0x due
to a sustained decline in profitability driven by a prolonged cyclical
downturn or a secular downturn driven by continued audience and ad dollar
losses to alternative media channels, could result in a rating downgrade.
Additionally, large debt financed acquisitions that would increase
debt and leverage to above $950 million and 4.0x,
respectively, and / or shareholder distributions and erosion of
the liquidity profile would also likely have negative credit ratings implications.
The last rating was on August 11, 2010, when Moody's assigned
the company a Ba2 CFR and Ba3 PDR in conjunction with the company's
emergence from Chapter 11 in June 2010.
The principal methodologies used in this rating were Moody's Global Broadcast
Industry Methodology 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.
Citadel Broadcasting Corporation, with its headquarters in Las Vegas,
Nevada, is a radio broadcaster comprised of 166 FM and 59 AM stations
in more than 50 markets. For the LTM period ended September 30,
2010, Citadel generated revenues of $741 million.
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.
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Alexandra S. Parker
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's assigns Citadel Broadcasting's proposed first-lien bank facility a Baa3 senior secured rating and a Ba3 to its proposed new senior unsecured notes
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New York, NY 10007
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