Investing.com -- On May 13, 2025, Urban One Inc. announced it had repurchased over 10% of its senior secured notes due 2028 at a significant discount to par. S&P Global Ratings viewed this transaction as distressed, equivalent to a default, as lenders received less than originally promised.
Without this transaction, S&P Global Ratings believed there was a realistic chance of a conventional default. Consequently, the ratings agency downgraded Urban One’s issuer credit rating from ’CCC+’ to ’SD’ (selective default). Additionally, the rating on the company’s senior secured notes was lowered to ’D’.
Urban One has repurchased $88.6 million of its 7.375% senior secured notes due in 2028, which is more than 10% of the original note issuance amount of $825 million. Despite the notes being repurchased in the open market, S&P Global Ratings still viewed the buyback as a restructuring due to the significant portion of the debt issue that was repurchased.
The repurchase was viewed as distressed and equivalent to a default since lenders received less than originally promised at an average price of 53.9%, a considerable discount to par.
Urban One ended 2024 with a S&P Global Ratings-adjusted gross leverage of about 6x. The ratings agency expects EBITDA will decline over the next few years due to both cyclical and secular challenges facing broadcast radio and cable television. This is likely to make it difficult for the company to improve credit metrics significantly before the company’s note maturity in February 2028.
S&P Global Ratings plans to raise its ratings back to ’CCC+’ in the upcoming days. However, the agency believes Urban One remains dependent on favorable business, financial, and economic conditions to meet its financial obligations, despite the recent reduction in debt.
The majority of the company’s business comes from national advertising, which is expected to continue underperforming local advertising. The company’s digital businesses have also been facing challenges due to client attrition, the renegotiation of contracts, and higher traffic acquisition costs.
S&P Global Ratings believes it will become increasingly difficult for debt repayment to fully offset EBITDA declines. The ratings agency also believes the company will likely seek additional opportunities to buy back debt at a discount. This would likely be viewed as distressed and equivalent to a default, given its challenged operating and financial performance and uncertainty around future cash flows.
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