Moody's cuts Clear Channel Communications ratings

Moody's Investors Service said Monday it cut its ratings on Clear Channel Communications Inc. further into junk status, citing a "high probability" that the radio station operator will not comply with a debt agreement this year and be forced to restructure its debt.

Clear Channel is a unit of CC Media Holdings Inc. The company was taken private last July by Bain Capital Partners and Thomas H. Lee Partners.

Moody's lowered the company's corporate family rating and probability-of-default rating to "Caa3" from "B2."

In February, Moody's lowered its expectations for radio broadcasting stations and outdoor advertising, predicting deeper revenue declines for both.

Moody's now expects Clear Channel's radio revenue will decline in the upper teens percentage range and outdoor advertising revenue will drop by about 15 percent.

Based on the new estimates, Moody's said Clear Channel is likely to violate its secured debt leverage covenants in 2009.

"With a capital structure that was highly speculative from its inception, the company's ability to continue as a going concern is completely dependent upon remaining in compliance with its covenants," said Moody's Senior Vice President Neil Begley in a statement. "But in the current economic environment, compliance will be very challenging, and as a result, such a capital structure will not likely be sustainable."

Moody's also cut its ratings on Clear Channel's senior secured credit facilities to "Caa2" from "B1" and its senior unsecured notes ratings to "Ca" from "Caa1." In addition, Moody's downgraded Clear Channel's speculative grade liquidity rating to "SGL-4" from "SGL-2."

The ratings outlook was lowered to "Negative."

About $23 billion of rated debt is affected by the action, Moody's said.