Moody's cuts Radio One

Moody's Investors Service said it downgraded Radio One, Inc.'s corporate family and probability-of-default ratings to B2 from B1.

The agency downgraded the $500 million secured revolver and $300 million secured term loan to Ba3 from Ba2 (LGD2, 24%), and $200 million 6 3/8% senior subordinated notes and $300 million 8 7/8% senior subordinated notes to Caa1 from B3 (LGD5, 80%).

The outlook is negative.

According to Moody's, the downgrades were prompted by ongoing weakness in the company's operating performance and a correspondingly weak liquidity profile. This concludes the review that began on March 13.

Ratings reflect significant financial leverage, with a debt-to-EBITDA ratio of 7.9 times, continued weak operating performance and modest free cash flow generation, the agency said.

Ratings also incorporate the inherent cyclicality of the advertising business, belief that radio is a mature business facing secular pressure and the increasing fragmentation of advertising, the agency added.

Ratings are supported by the company's diverse geographic presence, complementary properties targeting the African-American audience and a meaningful proportion of local advertising revenue, Moody's said.

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