Radio One (ROIAK)

Radio One (ROIAK) - We maintain our Sell rating on Radio One. 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.