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Rating Action:

Moody's downgrades Cumulus Media to Caa2 from Caa1; outlook negative

Global Credit Research - 11 Apr 2017

New York, April 11, 2017 -- Moody's Investors Service (Moody's) downgraded Cumulus Media Inc.'s (Cumulus) Corporate Family Rating to Caa2 from Caa1, the secured credit facilities to Caa1 from B3, and senior unsecured notes to Ca from Caa3. The outlook was changed to negative from stable.

The downgrade reflects the elevated risk of a restructuring of its balance sheet and its unsustainable leverage level of 11.3x (excluding Moody's standard lease adjustments) as of Q4 2016. Despite recent operational improvements, EBITDA continued to decline in 2016 and is expected to remain under pressure due to higher content expense and lower political ad revenue.

A summary of Moody's actions are as follows:

..Issuer: Cumulus Media Inc.

.....Corporate Family Rating: Downgraded to Caa2 from Caa1

.....Probability of Default Rating: Downgraded to Caa3-PD from Caa1-PD

....Speculative Grade Liquidity Rating: affirmed at SGL3

.....Outlook changed to Negative from Stable

..Issuer: Cumulus Media Holdings Inc.

.....$200 million 1st Lien Senior Secured Revolver due 2018 (undrawn): Downgraded to Caa1, LGD2 from B3, LGD3

.....1st Lien Senior Secured Term Loan due 2020 ($1.8 billion outstanding): Downgraded to Caa1, LGD2 from B3, LGD3

.....$610 million of 7.75% senior notes due 2019: Downgraded to Ca, LGD5 from Caa3, LGD5

RATINGS RATIONALE

Cumulus' Caa2 Corporate Family Rating reflects the company's unsustainable debt-to-EBITDA leverage of 11.3x as of Q4 2016 (excluding Moody's standard lease adjustments) as well as the elevated potential for a restructuring of its balance sheet. Cumulus maintains a diversified market position in 90 different markets and is one of the leading radio operators in the US. However, EBITDA has declined substantially over the past several years and higher content costs and lower political ad revenue in 2017 are expected to offset recent improvements in operational performance and lead to continued pressure on EBITDA. The ratings also incorporate the secular pressures and cyclical nature of radio advertising demand which have the potential to exert substantial pressure on EBITDA performance over time. Free cash flow has also declined and was less than 1% as a percentage of outstanding debt as of Q4 2016. The company does not have access to its revolving credit facility due to covenant constraints, but has a $50 million revolving securitized facility in place and $131 million in cash as of Q4 2016. A pending asset sale is expected to add additional cash to the balance sheet in the second half of 2017. The nearest debt maturity is the $610 million senior notes due May 2019, but the maturity date of the term loans springs to 91 days ahead of the maturity date of the senior notes if more than $200 million of the senior notes are still outstanding at the springing maturity date.

The SGL-3 Speculative Grade Liquidity Rating reflects the lack of access to its revolving credit facility due to covenant constraints and limited free cash flow. Liquidity does benefit from $131 million in cash as of Q4 2016 and expectations that a pending asset sale could add additional cash to the balance sheet. We expect free cash flow to be minimal in 2017 after approximately $30 million in expected capex in 2017. The company has an undrawn $50 million securitized facility in place which matures in 2018 (unrated).

Its $200 million revolving credit facility due 2018 is unavailable as the first lien covenant ratio is in excess of the required ratio of 5.0x as of Q4 2016 and the covenant decreases to 4.0x in Q1 2018. The term loan is covenant-lite and the revolver requires compliance with a consolidated total net leverage ratio covenant only if the revolver is drawn or if there are letters of credit under the revolver commitment that are not 103% cash collateralized. Alternate sources of liquidity are limited given the revolver and term loan are secured by substantially all assets of the borrower and subsidiaries with a 12 month reinvestment period for dispositions.

The negative outlook reflects the heightened potential for a restructuring of its balance sheet and the challenging outlook due to higher contractual content expense and reduced political revenue in a non-election year. An exchange of existing debt for another security would likely be considered a Distressed Exchange (DE) by Moody's.

An upgrade is not expected in the near term given the high leverage level and potential for a restructuring of its balance sheet. However, we could consider an upgrade if the company sustains leverage under 7.5x with expectations for stable operating performance. Liquidity would also need to be good with improved availability under the company's committed revolver facilities and free cash flow-to-debt in the mid to high single digit percentage range.

Ratings could be downgraded upon a restructuring of its balance sheet or an exchange of existing debt for another security which Moody's would likely consider a Distressed Exchange. Elevated concern regarding the ability to service its debt could also lead to negative rating action.

Headquartered in Atlanta, GA, Cumulus Media Inc. is one of the largest radio broadcasters in the U.S. with approximately 445 stations in 90 markets, a nationwide network serving over 8,200 broadcast affiliates and numerous digital channels. Cumulus is publicly traded with Crestview Radio Investors, LLC owning an estimated 30% interest. The company reported $1.1 billion of net revenue for FY2016.

The principal methodology used in these ratings was Global Broadcast and Advertising Related Industries published in February 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Scott Van den Bosch
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

No Related Data.
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