By Anita Huslin
Washington Post Staff Writer
Friday, November 7, 2008

Radio One yesterday wrote down the value of its broadcasting licenses by $337.9 million, suspended retirement contributions and posted a loss for the third quarter as the industry continues to swoon from falling advertising and competition from new media.

Radio One said yesterday that third-quarter revenue fell 2 percent, to $86.2 million. It lost $266.1 million ($2.81 a share), compared with a profit of $4.7 million (5 cents) in the third quarter of 2007.

National ad revenue fell 17 percent from the same quarter a year earlier, and auto ad sales, which account for more than 10 percent of Radio One's business, were down 37 percent.

Industry analysts are particularly concerned about radio companies saddled with a lot of debt. Radio One, which borrowed heavily as it bought broadcasting licenses and expanded online, is working hard to avoid violating or having to renegotiate deals with its lenders, whose standards have tightened in the past year. Lending agreements generally cap companies' debt and establish cash-flow requirements. The Lanham company, which primarily targets urban listeners, had $765.1 million in debt at the end of the quarter.

Radio analyst Frederick W. Moran said projected continued declines in ad sales bode poorly for Radio One.

"It's just a question of how much penalty the banks force upon them," he said. "I think the only thing they can do is try to survive the downturn the best they can and live to fight another day."

Radio One chief executive Alfred C. Liggins III yesterday acknowledged worries about the worsening economy and its effect on the company's ability to manage its debt. However, he said the company was meeting its interest payments, had retired bond debt and was cutting back expenses in part by halting its contributions to its 401(k) retirement plan.

"Early on in this mess, the banking environment was really, really hostile," Liggins said, with lenders looking to cancel loans or raise rates when companies breached deals. "Our number-one goal is to not have to come back to them for something."

As the economic downturn has continued, banks may be more measured in recalling loans or forcing radio companies to liquidate.

"They may be better off renegotiating some of the loan terms and letting operators try to work things out," said industry analyst Mark Fratrik of BIA Financial.

The radio industry was already battered, as listeners' options had grown with Internet radio, satellite radio or MP3 players. More recently, advertisers have cut back budgets. Many radio companies have been hit: CBS last month wrote down the value of its television and radio licenses by $14 billion.

In recent months, stations that have been on the market have languished because of the lack of credit and the fact that most companies are in cost-cutting modes, analysts said. Radio One is not currently selling any stations.

Radio company Emmis Communications has recategorized expenses to maintain cash flow so that it won't violate deals with lenders. Companies with the highest debt levels have seen the steepest drop in stock prices. Nasdaq last month put Radio One on notice that it was in danger of being delisted after its stock price dropped below $1. Yesterday it closed down 1 cent, at 58 cents a share.