Analyst says Nexstar TV purchase is debt-neutral


Nexstar Broadcasting GroupMoody’s sees no reason to lower its rating of Nexstar debt as a result of its purchase of 12 Newport Television stations in eight markets. A number of factors figure in to the firm’s estimations.

Moody’s is leaving the Nexstar’s corporate family rating right where it is, at B3, and further adds that the company has elements in place to move to a B2 CFR.

“Nexstar expects to fund the acquisition with a new first lien credit facility, consisting of a $570 million term loan and a $75 millionrevolver,” said Moody’s. “Proceeds of the new facility will also go towards the redemption of all outstanding Senior Subordinated Notes due January 2014 (approximately $112.6 million outstanding) and to refinance the existing first lien credit facility (approximately $167.4 million outstanding).”

Here’s what it all means:

* The increase in leverage will barely be noticeable – Moody’s puts it at about 0.5 times debt-to-EBITDA.

* A big political windfall this autumn will further improve the company’s credit profile.

* Nexstar’s CFR can earn the B2 upgrade is it can get below 6X-debt-to-EBITDA on a two year average basis, keep free-cash-flow-to-debt levels in the positive mid-to-high single digit range and keep improving its core advertising revenue growth.

Moody’s likes the increased scale the deal brings to Nexstar, along with retransmission consent-based revenue growth and overhead savings due to efficiencies added via the acquisition.

It noted Nexstar’s historical use of free cash flow for either debt reduction or acquisitions, and cautioned that any deviation from this could change the company’s rating.