S&P downgrades broadcaster as loan holders block coupon

Standard & Poor’s downgraded troubled US broadcaster Radio One to selective default yesterday after it skipped a coupon payment on its 2013 subordinated bonds on 15 August. Bank lenders blocked the interest payment because of a leverage covenant failure on the loans.

A failure to cure the default within the 30-day grace period would trigger cross-default on all the lender’s debt, the rating agency notes. S&P says that recovery expectations on the sub notes are negligible

The company, which describes itself as an urban media specialist, has $200 million of 2013 notes outstanding as well as around $100 million of subordinated notes maturing in July 2011. According to Finra’s Trace service, trading in the 2013 bonds ground to a halt on 10 August, when a block of bonds changed hands for 83.6 cents in the dollar.

The company has $350 million of term loans and a $50 million revolver outstanding, for which Wells Fargo is the agent bank. The loans mature in 2012, but will become due on 1 January if Radio One fails to refinance its bond debt.

On Monday, the Nasdaq-listed company restated its earnings for the past three years. The impact of the change was to reduce its net worth and increase its leverage.