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Radio One announced that it had agreed to sell its only radio station in Los Angeles, KRBV-FM, to Bonneville for $137.5M. We estimate that the station lost $5M of cash flow in 2007, and we were budgeting the station to be break even in 2008. We believe the tax basis for KRBV-FM was $250M, and estimate that net proceeds from the sale will be approximately $135M. We expect proceeds will be utilized to 1) purchase Bonneville's WPRS-FM in D.C. for $35M (ROIAK had an option to buy the station); 2) delever the balance sheet; 3) repurchase shares; and 4) invest in the internet. The transaction is expected to close in 2Q 2008.
The sale creates considerable breathing room between the company's bank covenants and its leverage ratio.