Splitting headache for Graham


Carl SalasThe decision to split cable properties away from the broadcast and other assets of Graham Holdings Company (a remnant of the old Washington Post empire) did not sit well with Moody’s Investors Service.

The Wall Street ump is considering whether or not to change Graham’s rating in the wake of the move.

According to Moody’s analyst Carl Salas (pictures), the company’s Baa3 senior unsecured rating and stable outlook are under review for downgrade.

It all stems from the company’s decision to make Cable One a separate independent company.

Salas said, “The proposed spin-off would reduce revenue diversification, eliminate high margin cash flow contributions from stable cable operations, and pressure financial metrics.”

According to the stats Salas was looking at, the hole cable’s absence will poke in Graham’s financials will be substantial. Cable One accounted for only 24% of revenue but an impressive 49% of EBITDA. The small, five-station television group’s percentages are also overweight on the profit side, with a 9% share of Graham revenue and 26% share of EBITDA. Meanwhile, Graham’s Kaplan Education unit accounts for 64% of revenue but a mere 28% of EBITDA.