Cumulus Media's first-out senior secured debt rating holds at 'CCC+' at S&P

S&P Global Ratings affirmed Cumulus Media's ’CCC+’ issuer credit rating with a negative outlook, while revising recovery ratings on its first-out senior secured debt due 2029 to ‘4’ from ‘3’, reflecting an expected 35% recovery in a default scenario, down from previous estimates. The revision is attributed to reduced EBITDA projections in a hypothetical default scenario ($66 million, down from $89 million) due to ongoing pressures in the broadcast radio industry. Ratings on the second-out senior secured debt due 2026 remain at ‘CCC-’ with a recovery rating of ‘6’, indicating negligible recovery expectations, though Cumulus is expected to maintain sufficient liquidity over the next 12 months.

Analysis

S&P Global Ratings has affirmed Cumulus Media Inc.'s 'CCC+' issuer credit rating and maintained its negative outlook, underscoring the company's dependence on favorable business, financial, and economic conditions to meet its financial obligations. While the rating on its first-out senior secured debt due 2029 (comprising a $311.8 million term loan and $306.4 million in notes) was also affirmed at 'CCC+', the recovery rating for this debt was downgraded to '4' from '3'. This revision signifies a reduced expectation of recovery to approximately 35% in a payment default scenario, primarily driven by a lower estimated EBITDA of $66 million in a hypothetical default, down from a previous estimate of $89 million, reflecting persistent pressures within the broadcast radio industry. The issue-level ratings on Cumulus Media's second-out senior secured term loan and notes due 2026 remain at 'CCC-', with a '6' recovery rating indicating negligible (approximately 0%) recovery prospects. Despite these concerns, S&P anticipates Cumulus Media will possess sufficient liquidity, through cash reserves and availability under its $125 million ABL facility, to cover its operational and fixed-charge obligations over the next 12 months. The rating agency's simulated default scenario projects a default in 2026, stemming from increased media competition and an advertising downturn, with a going-concern valuation based on a 5.0x multiple of projected emergence EBITDA.

Key Decisions for Investors

• Investors in Cumulus Media's first-out senior secured debt (due 2029) should acknowledge the heightened risk profile due to the revised recovery rating, now anticipating only a 35% recovery in a default.
• Equity investors and holders of the second-out senior secured debt (due 2026) face significant risk, given the 'CCC+' issuer rating, negative outlook, and negligible recovery expectations for junior tranches, implying minimal to no value in a distress scenario.
• Closely monitor Cumulus Media's liquidity levels, operational performance against the backdrop of broadcast radio industry challenges, and its ability to navigate the competitive landscape, as these are critical to its debt servicing capacity.
• The sustained negative outlook and distressed credit ratings warrant a thorough reassessment of risk tolerance for any exposure to Cumulus Media's securities, particularly in light of the reduced recovery prospects for senior lenders.