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Investing.com -- S&P Global Ratings has affirmed its ’CCC+’ issue-level ratings on Cumulus Media (OTC:CMLS) Inc.’s financing subsidiary, Cumulus Media New Holdings Inc.’s $311.8 million first-out senior secured term loan due 2029 and its $306.4 million first-out senior secured notes due 2029. Simultaneously, the recovery ratings on this debt were revised to ‘4’ from ‘3’. This ’4’ recovery rating mirrors the expectation of an average recovery of approximately 35% in the event of a payment default.
The revision follows a reduction in the estimated EBITDA in a hypothetical default scenario, which is now $66 million, down from $89 million. This is due to ongoing pressures facing the broadcast radio industry, which have decreased the value available to lenders in a simulated default scenario, thus reducing expected recovery prospects.
In addition, S&P Global Ratings affirmed its ‘CCC-’ issue-level ratings on the company’s $1.2 million second-out senior secured term loan due 2026 and its $22.7 million second-out senior secured notes due 2026. The recovery rating for these remains at ‘6’, indicating an expectation of negligible recovery (approximately 0%) in the event of a payment default.
The ’CCC+’ issuer credit rating and negative outlook on Cumulus Media remain unchanged. This is based on the belief that the company relies on favorable business, financial, and economic conditions to meet its financial obligations. However, it is still anticipated that Cumulus will have sufficient liquidity through cash and availability under its revolving asset-based lending (ABL) facility to meet its operating and fixed-charge obligations over the next 12 months.
Cumulus Media New Holdings Inc.’s capital structure includes a $311.8 million first-out senior secured term loan maturing in 2029, $306.4 million of 8.00% first-out senior secured notes due in 2029, a $1.2 million second-out senior secured term loan maturing in 2026, and $22.7 million of 6.75% second-out senior secured notes due in 2026. The company also has a $125 million senior secured ABL facility, not rated, maturing in 2029.
The ABL facility has a first-priority lien on accounts receivable, qualified cash, and related assets. The $311.8 million term loan due 2029 and its $306.4 senior notes due 2029 are secured by a first-lien (second-lien to the ABL priority collateral) on substantially all of the existing and future assets of holdings and the existing guarantors. The debt due 2029 is also guaranteed by certain subsidiaries that are designated as unrestricted under the term loan due 2026 and the senior notes due 2026.
In a simulated default scenario, it is assumed that a default would occur in 2026 due to increased competition from alternative media and a cyclical downturn in advertising. This would reduce Cumulus’ revenue and cash flow given its largely fixed-cost base. Other assumptions include a 60% draw on the ABL facility and all debt includes six months of prepetition interest. The company is valued on a going-concern basis using a 5.0x multiple of the projected emergence EBITDA, which is in line with that of other similarly sized radio companies.
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