Nexstar’s announcement that it will sell $325 million in new second lien notes and rework its senior credit facilities was well received by Moody’s Investors Service. It’s given Nexstar a debt rating upgrade.
Moody’s announced that it had upgraded the corporate family rating (CFR) of Nexstar Finance Holdings, Inc. (Nexstar) to B3 from Caa1, its probability of default rating (PDR) to B3 from Caa2 and its Speculative Grade Liquidity Rating to SGL-2 from SGL-3. Moody’s also assigned a B3 rating to Nexstar Broadcasting Inc.’s proposed second lien notes issuance and a Ba3 rating to its amended first lien bank credit facility. “The outlook is now stable,” Moody’s said. In all, Moody’s has ratings on approximately $600 million of Nexstar debt.
“The upgrade of the corporate family rating incorporates the better liquidity position pro forma for the transaction, which extends maturities and alleviates near term covenant compliance concerns, as well as the improved advertising outlook. Moody’s anticipates Nexstar will use some of the projected stronger performance in 2010 to repay debt, better positioning the company to withstand future volatility from both election and economic cycles,” Moody’s said.
“Expectations for increased external liquidity from the proposed revolver and increased EBITDA over the next twelve months from both political advertising revenue and a healthier advertising environment drive the SGL upgrade,” the ratings agency said.
Moody’s said it anticipates Nexstar will use proceeds from the proposed $325 million second lien notes issuance, the $75 million first lien revolver and the $100 million first lien term loan primarily to repay the existing term loan (approximately $320 million outstanding) and outstanding borrowings under the revolving credit facility (approximately $70 million outstanding).
“Nexstar’s B3 corporate family rating incorporates its high leverage (over 10 times debt-to-EBITDA for 2009 and in the mid 8 times on a two year average basis) and modest free cash flow, which poses challenges for managing a business vulnerable to advertising spending cycles. However, Moody’s anticipates Nexstar will use some of the projected strong political revenue in 2010 to permanently repay debt and to improve its capital structure to better withstand future volatility from both election and economic cycles. Good margins and unlevered cash flow generation created by Nexstar’s diverse geographic footprint, continued local market focus, and leading audience share in many markets support the rating, but the company faces continued competition for advertising dollars related to media fragmentation. Nexstar’s rating also benefits from its diverse network affiliations and local marketing agreement (LMA) with Mission Broadcasting, which expands programming coverage and cost efficiencies,” said the Moody’s analysis.
The ratings firm said the stable outlook incorporates expectations that Nexstar’s leverage will fall to approximately 7 times debt-to-EBITDA in 2010 and remain below 8 times on a two year average basis and that it will continue to generate modestly positive free cash flow.
Moody’s ratings actions:
Nexstar Finance Holdings, Inc.
….Corporate Family Rating, Upgraded to B3 from Caa1
….Probability of Default Rating, Upgraded to B3 from Caa2
….Speculative Grade Liquidity Rating, Upgraded to SGL-2 from SGL-3
….11.375% senior discount notes due 2013, Upgraded to Caa2 from Ca, LGD adjusted to LGD6, 95% from LGD5, 84%
….Outlook, changed to stable from negative
Nexstar Broadcasting, Inc.
….Senior Secured First Lien Bank Credit Facility, Assigned Ba3, LGD1, 7%
….Senior Secured Second Lien Notes, Assigned B3, LGD3, 45%
….7% senior subordinated notes due 2014, Affirmed Caa2, LGD adjusted to LGD5, 84% from LGD4, 58%
….Outlook, changed to stable from negative
Mission Broadcasting, Inc.
….Senior Secured First Lien Bank Credit Facility, Assigned Ba3, LGD1, 7%
