Analyst says Sinclair buying within its means


SBG / Sinclair Broadcast GroupIt’s not that Sinclair isn’t carrying any debt – it is – but according to Moody’s Investor Service, its latest deal, the $373.3M merger with Fisher, will have no impact on its overall rating.

Going into the deal Moody’s had assigned Sinclair a Corporate Family Rating of Ba3, and that is where it will remain in the wake of the announcement. The estimated leverage going forward for Sinclair, taking into account the acquisitions from Fisher, Barrington and Cox, is expected to be 5.2x.

Moody’s Carl Salas noted, :The transaction brings attractive west coast markets of Seattle and Portland and is consistent with Sinclair’s recent actions to expand its footprint with improving geographic, network and market size diversity. Management expects to achieve meaningful revenue and expense synergies, including higher retransmission fees, elimination of expenses related to public filings and reduction of corporate overhead, to boost free cash flow and help offset the negative impact of incremental acquisition debt. Closing is expected by the end of 3Q2013 with the merger subject to FCC approval, antitrust clearance, the affirmative vote of two-thirds of Fisher’s outstanding shares, and other customary conditions. Funding will come from cash on hand plus additional bank facilities or new capital market issuances.”

Sinclair’s coverage of US households is going to be about 33.7% once everything closes, and although it is heavily invested in Fox affiliations, that portion of its station portfolio will only be 22%, indicating a healthy level of programming diversification.