Why Moody’s Upgrades Entercom
Moody’s Investor Service upgraded Entercom Communications Corporate Family Rating to B1 from B2 and Probability of Default Rating to B1-PD from B2-PD. Moody’s also upgraded the company’s secured credit facilities to Ba2 from Ba3 and senior unsecured 10.5% notes to B3 from Caa1.
The upgrade reflects Entercom’s cash flow. Entercom’s B1 corporate family rating reflects moderately high debt-to-EBITDA (4.6x as of March 30, 2016 including Moody’s standard adjustments and pro forma for recent transactions) which has improved meaningfully from 6.3x since the last rating action in November 2011 due largely to debt prepayment from free cash flow. “Ratings are supported by organic revenue growth, improved audience ratings, effective sales execution, large market presence, and geographic diversity enhanced by the Lincoln Financial Media acquisition,” said Moody’s Carl Salas.
Absent the potential for debt financed acquisitions or increased shareholder distributions, Moody’s predicts Entercom will continue to reduce debt with free cash flow and maintain leverage below current levels with more than $50 million of annual free cash flow (at least 9% of debt balances).
The outlook is stable supported by Moody’s expectations for organic revenue growth in FY2016.