• by Erik Sass  @eriksass1, February 19, 2010

The nation's largest radio broadcaster and billboard advertising company is in the clear financially -- at least until 2014, according to Moody's Investors Service, which raised its credit rating on Clear Channel Communications.

The upgrade from Caa3 to Caa2 means that Moody's believes there is no longer a significant risk of the company defaulting under the terms of its lending covenants, decreasing the likelihood of bankruptcy proceedings.

Moody's cited the successful refinancing of a $2.5 billion loan to Clear Channel Outdoor from its corporate parent, which will ease the company's financial burdens in the near future. The move allowed Moody's to classify its new rating as "stable," meaning it doesn't foresee any significant adjustments over the next year and a half.

However, looking further into the future, the company will probably have to restructure its debt if it is to make a scheduled $3.7 billion payment by 2014.

Clear Channel Communications assumed about $18 billion in debt as part of a deal to take the company private engineered by two private equity firms -- Thomas H. Lee Partners and Bain Capital Partners -- in July 2008, bringing its total outstanding debt to $23 billion.

Like the rest of the radio industry, Clear Channel Radio saw ad revenues fall sharply during the credit crunch and economic downturn, which began in the second half of 2008, raising questions as to whether it would be able to maintain cash flow levels as required by its lending covenants.

In 2009 Clear Channel Communications laid off several thousand people, but the private-equity buyers expressed confidence that the company would steer clear of bankruptcy.

The recent announcement from Moody's delivers some much-needed good news for the radio business following bankruptcy declarations by other radio broadcasters. In December 2009, Citadel Broadcasting filed for Chapter 11 bankruptcy protection after being booted from the New York Stock Exchange in February 2009. In January 2010, Air America filed for bankruptcy and ceased broadcasting, while Regent Communications was delisted from NASDAQ.