Moody's downgrades Citadel

Moody's Investors Service said it downgraded Citadel Broadcasting Corp.'s corporate family rating to Caa2 from B3, probability-of-default rating to Caa3 from Caa1 and senior secured credit facility to Caa2 (LGD3, 31%) from B3. The SLG-4 speculative-grade liquidity rating is unchanged.

The outlook is negative.

The downgrade reflects Moody's concern that Citadel's liquidity, including cash on hand and bank revolver availability, are very modest in relation to its $2 billion debt load and therefore the company is nearly fully dependent upon its ability to continuously generate free cash flow to avoid a default.

The agency also believes that the U.S. economy's impact on 2009 radio revenues will be greater than forecasted when it lowered Citadel's ratings in November and that, absent a very near-term rebound in advertising revenues, the company's risk of default is high over the next 12 to 18 months as its free cash flows will likely be significantly impacted.

The company's leverage ratio was 7.9 times as of Sept. 30, and Moody's believes this ratio will increase to about 13.5 times by the end of 2009.

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