Spurred by the telecommunications industry's consolidation, radio- related loans totaled $9.7 billion through July 31, nearly double the record set last year.

The vast majority-$7.25 billion-have funded acquisitions of radio stations, according to a new report from LS&T Research, a unit of BancAmerica Securities Inc.

The Telecommunications Act of 1996 relaxed longstanding ownership limitations on radio properties and sparked a wave of consolidation that is now providing profits, growth, and new corporate relationships for lenders.

The trend has been building. Last year, radio-related credit totaled $5.7 billion, more than twice 1995's volume of $2.6 billion.

"There are a lot more banks that would tee up to do radio deals than ever before," said one senior lender to broadcast media.

That universe of radio lenders - those banks and institutional investors who participate in three or more radio deals in a year - exploded to 27 in 1996, from just five in 1993, according to the report.

Although this increase in competitors for radio deals has added liquidity to the market, it also has driven returns to new lows.

The average spread over the London interbank offered rate on radio loans was 300 basis points in 1991 and remained at or above 240 basis points through last year.

But over the first four months of this year, the average spread on radio-related loans has dropped 50 basis points, to 190 basis points over Libor, according to the report.

Seeking new deals and higher yield than is currently available on large credits, some lenders are moving to fund consolidators outside the biggest media markets, in cities such as Des Moines, Milwaukee, and Albuquerque.

"There's still tremendous opportunities among the smaller market operators," said Lisa Cosimano Gallagher, managing director with BankBoston Corp.'s media and communications group.

"What you're starting to see happening now is the consolidation dipping down below the top 30 markets," she added.

Large consolidators and operators of radio stations continue to snap up both individual stations and small groups of stations.

For example, Boston-based American Radio Systems Corp., founded in 1993, has developed or acquired 66 FM and 30 AM radio stations. The company received a $900 million syndicated loan package in January led by Bank of New York Corp., Chase Manhattan Corp., and Toronto-Dominion Bank.

Other radio consolidators such as Jacor Communications Inc., Evergreen Media Corp., Heftel Broadcasting Corp., and Clear Channel Communications also have tapped the syndicated loan market.

Some large consolidators are swallowing their competitors, such as Evergreen's simultaneous $2.58 billion purchase of Chancellor Broadcasting and 10 radio stations from Viacom Inc.

Radio consolidation not only creates new opportunities for bank financing, but makes those surviving radio groups more appealing, bankers said.

"The fact that they have created these huge fortresses in terms of lots of stations means that they are probably more resilient," one senior lender said. "They aren't subject to somebody attacking their format in a particular market, because (they) have a lot of different stations to bolster (their) cash flows."

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