Heavy Debt, Fewer Ads Put Radio Firms in a Squeeze

Mounting debt and a sharp drop in advertising at many of the nation's radio broadcasters have led to a slashing of their valuations to fire-sale levels and intense competition with other media for ad dollars. Historically, broadcast radio has been highly profitable and durable, weathering challenges from television, the Internet and other rivals. But starting in the late 1990s, radio companies loaded up on debt during a consolidation spree that narrowed the industry to just a few big companies. And, in the past few years, the industry has had to face new competition from iPods, satellite broadcasters and even mobile phones. Now, radio's problems are getting worse. The credit squeeze is limiting broadcasters' flexibility just as many of them seem likely to bump up against covenants that limit how much debt they can carry. And when some of them try to renegotiate terms with creditors, they may have a tough time bargaining their way out of trouble. At the same time, the contraction of ad spending, the industry's lifeblood, is deepening the crisis.