Station Trading Plummeted in ’08

SNL Kagan says coming months aren’t likely to be better, after radio’s ‘leverage hangover’ 
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Radio station sales fell more than half in the past year, according to SNL Kagan.

The company now anticipates “more forced sales, Chapter 11 reorganizations and declining cash flow multiples in the first half of 2009, as station owners cope with the weak ad market.”

But in issuing its latest study today, the firm also looked farther out and said it anticipates a “stronger financial future for broadcast radio after (a) difficult 2009.”

Radio station sales dropped from $2.2 billion in 2007 to $932 million in 2008, with the average price per station falling from $2.9 million to $1.6 million.

“On a positive note, the study suggests the current environment could open the door for investors to buy their way in at lower benchmarks than possible in the past, earning acceptable rates of equity return despite lower revenue growth,” the research company stated.

It quoted Senior Analyst Robin Flynn saying, “In recent years, radio has suffered from a ‘leverage hangover.’ Back in 2002, equity made up, on average, 76% of total market cap. However, that flipped in 2008, with 73% of total cap representing debt obligations.”

Flynn said companies are focused on reducing expenses and debt “and they will emerge from the current economic crisis with a more conservative business model, leading to revenue growth and at least partial recovery in station values off of today’s historically depressed levels.”

Flynn said broadcast radio remains “a viable business in the long term.”

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