CBS Radio plans $1.5 billion debt offering ahead of IPO: sources

By Liana B. Baker and Lauren Hirsch

(Reuters) - CBS Radio Inc, which CBS Corp (NYSE:CBS - News) is planning to shed, is preparing to take on about $1.5 billion in debt ahead of its initial public offering and use most of the proceeds to pay its parent in cash, according to people familiar with the matter.

The IPO for the subsidiary, which owns 117 U.S. radio stations, including in top markets such as New York and Los Angeles, was registered in July with the U.S. Securities and Exchange Commission. CBS has not publicly disclosed how much debt the unit plans to issue.

CBS Radio stated in its IPO registration statement that it would distribute some proceeds from the debt offering to its parent, while keeping some money for general corporate purposes.

CBS's debt offering will be split between bonds and loans, and could come before the end of the year, the sources said this week.

Goldman Sachs Group Inc (NYSE:GS - News), Wells Fargo & Co (NYSE:WFC - News), Bank of America Corp (:BAML.O) and Credit Suisse Group AG (:CSGN.S) are underwriters on the IPO, while JPMorgan Chase & Co (NYSE:JPM - News) is leading the bank financing, and Deutsche Bank AG (DBKGn.DE) is running the bond financing, the sources added.

The sources asked not to be identified because the details of the offering were not yet public. Representatives of CBS and all of the banks declined to comment.

CBS will use capital from the radio deal for buybacks and investing in the business, CBS Chief Executive Leslie Moonves told the Goldman Sachs Communacopia Conference this week. Moonves had said that private equity firms, radio rivals and international groups have expressed interest in buying CBS Radio.

An IPO, however, is viewed as the most likely option, according to the sources.

Speculation has grown among media industry insiders that CBS Corp may merge with Viacom, which has the same controlling shareholder in Sumner Redstone, although CBS CEO Moonves has said that no talks are underway.

CBS Radio is profitable and its sports, news and music stations are in top markets such as New York and Los Angeles. But a radio company IPO may be a tough sale as new digital competitors have emerged and depressed advertising sales for the medium for years.

Internet radio company Pandora Media Inc (NYSE:P - News) is taking a small but growing share of the $15 billion to $17 billion in local ad dollars from FM radio per year, Macquarie analyst Amy Yong said in a research note in August.

CBS Radio generated revenue of $1.23 billion last year, down from $1.3 billion a year ago, according to the IPO registration.

(Reporting by Liana B. Baker in San Francisco and Lauren Hirsch in New York; Editing by Richard Chang)