Covid Concerns Hit Salem, Nation’s Largest Christian Broadcaster
Moody’s Investors Service downgraded Salem Media Group’s “corporate family rating” and senior secured notes rating to Caa1 from B3. The future-looking outlook was also lowered from stable to negative. According to Moody’s, any company with a “C” rating is a “poor quality and very high credit risk.”
Moody’s which issued the downgrade in march, added: “The coronavirus outbreak is also expected to lead to lower revenue…in the near term and higher leverage levels.”
Salem Media Group owns one of the largest chains of Christian radio stations in the country. Its 2019 revenue was more than $250-million. It owns about a hundred radio stations. Salem also owns the conservative book imprint Regnery Publishing and the popular website Townhall.com.
According to Moody’s, “The downgrade reflects weaker than expected performance that Moody’s projects will persist in the next few quarters.” Revenue has fallen at Salem in recent quarters due to “the shift of ad dollars to digital mobile and social media, competitive conditions for local radio ad dollars, and declines in local block programming revenue.”
Block programming is primarily revenue from Christian ministries who air programs on Salem. Among Salem’s largest purchasers of block programming time are David Jeremiah’s Turning Point Ministries, Charles Stanley’s In Touch Ministries, and Focus on the Family. “National block programming is less reliant on advertising dollars due to its recurring nature,” the Moody’s report said, “although its local block programing has declined.”
Moody’s said, “While the company has a broad footprint, Salem’s top two markets (Los Angeles and Dallas) accounted for approximately 22 percent of net broadcasting revenue in 2019. The station portfolio is largely in the top 25 markets with the vast majority of signals on the less attractive AM band.”
The rating service also noted that though the company has very little cash and “weak performance in recent years,” it has nonetheless continued to make “distribution to equity owners.” Moody’s also said, “Salem has also completed a number of related party transactions with management and family members which owns the majority of the economic interest and has voting control of the company.”
These owners include: Edward G. Atsinger III (CEO), Stuart Epperson (Chairman, and brother-in-law of CEO), Edward C. Atsinger (son of the CEO), Nancy A. Epperson (Chairman’s spouse). Moody’s said these individuals “and their trusts own a majority of the economic interest in the company and have voting control through a dual class share structure with the remaining shares being widely held.”
On May 4, 2020, Salem Media Group (SALM) was trading for about $.83 per share. In 2004 it traded for more than $30 per share. Aside from a few rallies along the way, the stock has been on a steady slide since then.