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Rating Action:

Moody's upgrades Cumulus CFR to B1 and assigns B3 ratings to proposed senior unsecured notes and Ba3 ratings to proposed credit facilities

Global Credit Research - 25 Apr 2011

Ratings assigned to $3.025 billion of debt

New York, April 25, 2011 -- Moody's Investors Service ("Moody's") upgraded Cumulus Media, Inc.'s ("Cumulus") Corporate Family Rating ("CFR") to B1 from Caa1 due to the company's pending acquisition of CMP Susquehanna Corp. ("CMP") in the second quarter of 2011 followed by the announced $2.4 billion acquisition of Citadel Broadcasting Corporation ("Citadel") later this year. Transactions will be financed with approximately $3 billion of new debt facilities as well as up to $500 million of new equity. Moody's assigned a B3 (LGD6-90%) rating to the company's proposed $610 million senior unsecured notes due 2019 which will be used to refinance current outstandings under Cumulus' senior secured credit facilities. Moody's also assigned Ba3 (LGD3-38%) ratings to the proposed $375 million senior secured revolver and $2,040 million senior secured term loan B which will be used to refinance existing debt of CMP and Citadel. Ratings for existing facilities will be withdrawn upon closing of each of the debt issuances.

Moody's assigned a Speculative Grade Liquidity Rating 2 (SGL-2) based on expectations of good liquidity over the next twelve months. These actions conclude the review for upgrade that began in February 2011. The rating outlook is stable.

..Issuer: Cumulus Media, Inc.

Upgrades:

....Corporate Family Rating, Upgraded to B1 from Caa1

....Probability of Default Rating, Upgraded to B1 from Caa2

Assignments:

....$610 million Senior Unsecured Notes, B3 (LGD6-90%) - expected to be assumed by Cadet Holding Corporation when acquisition closes

..Issuer: Cadet Holding Corporation

Assignments:

$375 million Senior Secured Revolver, Ba3 (LGD3-38%)

$2,040 million Senior Secured Term Loan, Ba3 (LGD3-38%)

To Be Withdrawn As Applicable Transactions Close:

Issuer: Cumulus Media, Inc.

$20 million Senior Secured Revolver, Caa1 (LGD3-34%)

$648 million Senior Secured Term Loan, Caa1 (LGD3-34%)

Issuer: CMP Susquehanna Corp.

CFR, Caa1

... PDR, Caa1

$100 million Revolver due 2012, Caa1 (LGD3-48%)

$700 million Term Loan due 2013, Caa1 (LGD3-48%)

...$250 million Sr Subordinated Notes due 2014, Caa3 (LGD6-96%)

Issuer: Citadel Broadcasting Corporation

...CFR, Ba2

...PDR, Ba2

$150 million Sr Sec Revolver, Baa3 (LGD2-15%)

... $350 million Sr Sec Term Loan B due 2016, Baa3 (LGD2-15%)

$762 million Sr Sec Term Loan due 2015, Ba2 (LGD3-33%)

$400 million 7.75% Sr Notes due 2018, Ba3 (LGD5-71%)

Outlook is Stable

RATING RATIONALE

The B1 corporate family rating reflects Cumulus' high pro forma debt-to-EBITDA leverage of approximately 5.7x estimated for 12/31/2011 (including Moody's standard adjustments and treating 75% of preferred shares as debt, if issued) and assuming selling shareholders of Citadel require the maximum amount of cash payments, instead of stock. Ratings also reflect the cyclical nature of radio advertising demand evidenced by the revenue declines suffered by radio broadcasters during the recent recession, fragmentation of media outlets, and potential challenges associated with a large acquisition (Citadel has $740 million in revenue and 225 stations compared to $445 million in revenue and 346 stations for the combined Cumulus and CMP). Ratings are supported by the company's national scale, geographic and market diversity as well as expected 40% EBITDA margins. Post-transactions, Cumulus is expected to generate more than $300 million of annual free cash flow, or 10% of debt balances, from a well-clustered radio station portfolio that is effectively diversified by programming formats and audience demographics. Although revenues are expected to grow in the low to mid-single digit range through 2012, planned cost reductions will contribute to increasing free cash flow generation and debt reduction resulting in improved credit metrics. "Management has a multi-year track record of refining its proprietary technology platform and has been successful in driving down costs resulting in industry leading EBITDA margins. Management also confirms its strategy to reduce debt balances and targets reported gross debt-to- EBITDA ratios of 4.0x or better to gain operational and financial flexibility. In Moody's opinion, Cumulus' experienced management team and commitment to reduce debt balances provide rating support," stated Carl Salas, a Moody's Vice President and Senior Analyst.

Moody's believes the acquisitions will receive FCC approval and be completed by year end 2011 based on minimal market overlap in 6 markets. Approximately 13 stations have been identified for transfer to a trustee. Ratings assume successful execution; however, in the unlikely event the Citadel acquisition is not completed and there are no equity injections, the proposed $375 million revolver and $2,040 term loan would not be needed, and ratings could be downgraded given debt-to-EBITDA leverage of approximately 6.7x for the Cumulus borrowing group (including Moody's standard adjustments and assuming payment of Cumulus' portion of the termination fee).

The stable outlook reflects Moody's view that the acquisitions of CMP Susquehanna and Citadel will be completed in the expected time frame and that revenue and EBITDA will track along management's plan including success in achieving most of its synergy targets. "The outlook also incorporates Moody's expectation that Cumulus will maintain good liquidity and use free cash flow to reduce revolver or term loan balances resulting in debt-to-EBITDA leverage remaining below 6.0x (including Moody's standard adjustments) with free cash flow-to debt ratios of more than 9% in the near term. Financial metrics are expected to improve thereafter, consistent with management's target of 4.0x reported gross debt-to-EBITDA (or approximately 4.1x including Moody's standard adjustments)," added Salas.

Ratings could be upgraded if debt-to-EBITDA ratios are sustained below 4.5x (including Moody's standard adjustments) with good liquidity including free cash flow-to-debt ratios remaining above 10%. Absent sizable acquisitions, debt balances would also need to remain below $2.4 billion to accommodate likely EBITDA fluctuations in an economic downturn.

Ratings could be downgraded if debt-to-EBITDA ratios are sustained above 6.0x (including Moody's standard adjustments) due to the inability to achieve planned synergies or due to deterioration in performance as a result of increased competition in key markets, an economic downturn, or audience and advertising revenue migration to competing media platforms. Ratings could also be downgraded if leveraging events such as debt financed acquisitions or dividends result in debt-to-EBITDA ratios being sustained above 6.0x or if there is deterioration in liquidity. In the unlikely scenario the Citadel acquisition is not completed as planned and an equity injection is not funded, the proposed $375 million revolver and $2,040 million term loan would not be needed, and the CFR would likely be downgraded given potential debt-to-EBITDA ratios of approximately 6.7x for the Cumulus borrowing group (including Moody's standard adjustments and assuming payment of Cumulus' portion of the termination fee), a lower revenue base, as well as the absence of broader geographic and market diversification. In addition, coverage ratios would be weaker with approximately 1.8x EBITDA coverage of interest expense compared to approximately 3.2x under the Citadel acquisition scenario, and the committed revolver facility due May 2012 would be relatively small at only $20 million. Ratings on the new $610 million of Senior Unsecured Notes could potentially be downgraded.

The principal methodology used in rating Cumulus Media was the Global Broadcast Industry Methodology, published June 2008.

Corporate Profile:

Headquartered in Atlanta, Georgia, Cumulus Media Inc. ("Cumulus") is one of the nation's largest radio broadcasting companies, currently operating approximately 312 radio stations in 60 mid-sized markets. In 1Q2011 the company announced the acquisition of the remaining 75% of CMP Susquehanna Corporation ("CMP") it did not already own followed by the announcement that it entered into a definitive agreement to acquire Citadel Broadcasting Corporation ("Citadel"). Pro forma for these two acquisitions, Cumulus will be the second largest U.S. radio group with approximately 571 properties and $1.2 billion in station and network revenues as of December 2010. There will be one class of common shares with approximately 18%-27% to be owned by Crestview Partners, 7%-10% owned by the Dickey family, and the remainder broadly held among existing Cumulus and CMP shareholders and former Citadel shareholders.

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, confidential and proprietary Moody's Investors Service information, and confidential and proprietary Moody's Analytics 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
John Diaz
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

Moody's upgrades Cumulus CFR to B1 and assigns B3 ratings to proposed senior unsecured notes and Ba3 ratings to proposed credit facilities
No Related Data.
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