All three major bond-rating firms have now downgraded the Colorado Public Radio bonds that provided $4.7 million for the network’s 2001 expansion. The reason: CPR’s 2008 decision to take on the costs of an additional FM channel for its news service when listeners shunned the AM channel it had bought.
Fitch Ratings, like Standard & Poor’s, gave the bonds a BBB- rating, down from BBB+, but rated the network’s finances as “stable.” Moody’s declared that CPR’s fiscal outlook was negative.
The downgrades have no immediate practical effect on the Denver-based network, said Marc Hand, a managing partner in Public Radio Capital, because the $4.7 million in bonds are long-term debt set at a fixed rate. However, if CPR restructured its debt and reissued bonds, it would have to pay a higher interest rate.
Public Radio Capital is the Boulder-based nonprofit consulting group that facilitated the financing behind CPR’s expansion.
Fitch’s re-evaluation of the bonds, announced Feb. 2, reflects CPR’s “limited liquidity and increased debt burden” from the $8.4 million capital lease it signed last July for an FM channel. “However, Fitch realizes this was partially a result of the station investing in its programs and facilities, and expects liquidity levels to stabilize going forward.”
All three of the bond-rating firms have faced criticism for lack of rigor in their ratings of many financial institutions before the nation’s subprime mortgage meltdown, Hand said. As a result, they’ve become much more “cautious and pessimistic” in their credit ratings.
Colorado Public Radio aired its news service on an AM station from 2001 until last summer as it moved to develop a dual statewide service modeled after public radio networks in Minnesota and Wisconsin. But the audience didn’t take to the low-fidelity signal, which could not be found at the low end of the FM dial where most listeners expect to find pubradio.
The network responded with a complex deal that put its full-time news service on 90.1 FM in Denver. It moved its classical music service from that channel to 88.1 FM. PRC, which brokered the deal, acquired 88.1 FM last year through its own nonprofit limited liability corporation and leased it to CPR.
No other broadcaster has been willing to buy the AM signal from CPR, which leaves it with the $4.7 million bond debt. The station has been for sale since January 2008. CPR is re-evaluating what to do with it since the market for AM stations appears to have dried up, Hand said.
In the $8.4 million capital lease agreement that gave CPR the use of a second FM channel in Denver, the network agreed to a loan covenant that put up a significant portion of its cash reserves as collateral, Hand said. That created the “limited liquidity” that caused the bond-rating firms to reassess CPR’s financial position.
Published in Current, Jan. 22, 2008
Colorado Public Radio will bring its KCFR news service back to the FM band with the pending $8.2 million purchase of Denver Christian music station KFDN-FM.
CPR announced its acquisition of the 88.1 MHz frequency from EMF Broadcasting of Rocklin, Calif., Jan. 16 , and said the purchase completes a seven-year quest to strengthen both its news and classical stations.
Since 2001, KCFR has broadcast NPR News and other talk programming on 1340 AM in Denver. CPR put classical music on its 90.1 FM station, KVOD.
When the FCC approves the proposed ownership transfer, the classical service will move to 88.1 and KFCR News will take over 90.1, the stronger of the two frequencies.
“Based on community needs, the CPR Board has made news and information our service priority, while maintaining our historical commitment to classical music,” said Max Wycisk, president.
Public Radio Capital repped CPR in the deal. CPR plans to sell the AM station.