Moody's rates Citadel loans Ba3

Moody's Investors Service said it assigned Ba3 corporate family and probability-of-default ratings and an SGL-1 speculative grade liquidity rating to Citadel Broadcasting Corp. and a Ba3 (LGD3, 43%) rating to its $2.65 billion senior secured credit facility, which includes a $200 million six-year senior secured revolving credit facility, $600 million six-year senior secured tranche A term loan and $1.85 billion seven-year senior secured tranche B term loan.

The outlook is stable.

Citadel has entered into a merger agreement with the Walt Disney Co. and its subsidiary ABC Radio Holdings, Inc. under which Citadel's business will combine with ABC Radio network and 22 radio stations in a transaction that values ABC Radio at about $2.4 billion.

Proceeds from the credit facility will be used to refinance debt incurred by ABC Radio prior to its spinoff from Disney, to pay the special dividend to Citadel's pre-merger shareholders and to refinance the company's existing credit facility.

The agency said the ratings reflect a high pro forma debt-to-EBITDA ratio of 7.3x, modest free cash flow generation relative to expected debt levels, the challenges associated with improving the performance of the ABC Radio business, the inherent cyclicality of the advertising business and cross media-competition faced by radio for audience and advertising spending.

The company's ratings are supported by the combined entity's significant geographic, format and revenue diversification, strong station clusters, significant scale and Moody's expectation that management will remain committed to debt reduction such that the company's leverage will decline to about 6.3x over the next 18 to 24 months.

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