We maintain our Sell rating on Radio One, Inc. (ROIAK). In our view, the company's high leverage (6.6x) will hinder its acquisition activities in the near future, and thus its attempts to diversify into higher-growth areas. Moreover, in a period of declining earnings and cash flow, Radio One is nearing its covenant limits. The company is precariously close to its bank covenant limits, at a time when EBITDA is falling at an accelerating rate (down 25% in 3Q08). ROIAK's leverage was 7.23x at September 30th, bumping its 7.5x covenant limit, and similarly its interest coverage ratio was 1.77x, slightly above its lower limit of 1.75x. Although the company is utilizing sale proceeds to pay down debt, we think any additional near-term sales will be small and thus don't expect debt levels to decline substantially.Founded in 1980 and based in Lanham, Maryland, Radio ...

Some 23 different companies have been deleted in the blue chip benchmark since June alone as the credit crisis takes its toll.

 

 

The S&P 500 is set to add another exchange to its blue chip index. After the close of trading on Tuesday, the Nasdaq OMX Group Inc. will replace department store chain Dillard's Inc., which has occupied the blue chip benchmark's last spot.

The shift follows the addition of Comstock Resources Inc., an oil and natural gas producer, to the S&P MidCap 400 index. It replaced Entercom Communications Corp., a radio broadcaster that was listed as the benchmark's 400th largest company based on market-cap size when the move was made last week.

Also, the S&P SmallCap 600 index has made two changes within the past week. One of those involved replacing wireless tech provider EMS Technologies with Radio One Inc.  At the same time, Integral Systems Inc. was added and Fleetwood Enterprises, which makes recreational vehicles, fell out of the benchmark.

This

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Some 23 different companies have been deleted in the blue chip benchmark since June alone, as the credit crisis takes its toll.

 

The S&P 500 is set to add another exchange to its blue chip index. After the close of trading on Tuesday, the NASDAQ OMX Group Inc. will replace department store chain Dillard's Inc., which has occupied the blue chip benchmark's last spot.

The shift follows the addition of Comstock Resources Inc., an oil and natural gas producer, to the S&P MidCap 400 index. It replaced Entercom Communications Corp., a radio broadcaster that was listed as the benchmark's 400th largest company based on market-cap size when the move was made last week.

Also, the S&P SmallCap 600 index has made two changes within the past week. One of those involved replacing wireless tech provider EMS Technologies with Radio One Inc.  At the same time, Integral Systems Inc. was added

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Radio One, Inc. (ROIAK) is diversifying into businesses outside its core radio operations, which in the longer-term could offset the effects of radio’s secular decline. Together with Comcast (CMCSA), the company started the African-American cable TV network, TV One, which is expected to be cash-flow positive in the second half of 2008.

The company is also investing in online content and an Internet portal. With the recent sale of the Los Angeles and Miami stations, we expect ROIAK to acquire another 10% stake in TV One in 2009, and consolidate it, providing meaningful accretion. Near term, we expect revenue and earnings to trough in 2009 but have no visibility to renewed growth.

Meanwhile, in our view, the company’s high leverage may hinder its acquisition activities in the near future and thus, its attempts to diversify. Moreover, in a period of declining earnings and cash flow, Radio One is

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