S&P lowers Radio One

Standard & Poor's said it lowered its long-term corporate credit rating on Radio One Inc. to B+ from BB-, based on its concerns over the company's increasing leverage, thin margin of covenant compliance and weakened profitability in a number of key markets.

The outlook is negative.

At the same time, S&P said it lowered the ratings on Radio One's senior secured credit facility to BB- from BB and its subordinated rating to B- from B.

The agency said it also affirmed the 1 recovery rating on the secured bank facility, indicating high expectation of full recovery of principal in the event of a payment default.

According to S&P, the rating on Radio One reflects financial risk from aggressive, largely debt-financed station purchases, ongoing expansion, particularly in large markets, where unprofitable stations can be costly, increased competition from traditional and nontraditional media and advertising cyclicality.

These factors are only partially offset by Radio One's good competitive position targeting the African-American audience, radio broadcasting's high margin potential and good discretionary cash flow-generating capabilities and resilient station asset values, S&P noted.

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