The strong Q1 performance by Barrington Broadcasting did not go unnoticed by the debt analysts at Moody’s Investors Service. Barrington has gotten a rating upgrade on its $225 million of debt rated by Moody’s.
Here’s what the rating agency had to say:
“Moody’s Investors Service upgraded the corporate family and probability of default ratings for Barrington Broadcasting Group LLC (Barrington) to B3 from Caa1. In Moody’s opinion, the combination of an improved outlook for advertising spending and the debt repurchase undertaken during 2009 will facilitate continued covenant compliance even as the leverage covenant tightens and the equity cure received at the end of 2008 falls out of the calculation. Furthermore, Moody’s anticipates Barrington will use the cash flow from its stronger performance in 2010 to repay debt, better positioning the company to withstand future volatility from economic and election cycles and to address its debt maturities ($25 million revolver maturing August 2012 and $140 million outstanding on term loan maturing August 2013).
The stable outlook incorporates expectations that the improved outlook for advertising spending combined with cost cutting and revenue generating initiatives implemented during the downturn will enable meaningful EBITDA growth in 2010 relative to 2008. The stable outlook also assumes application of free cash flow to debt repayment, along with EBITDA growth, will enable Barrington to achieve leverage on a two-year average basis in the low 6 times debt-to EBITDA range or better.”
According to the Moody’s analysis, “Barrington’s B3 corporate family rating incorporates its high leverage (approximately 7.8 times debt-to-EBITDA for the trailing twelve months through March 31, 2010, and in the mid 7 times on a two year average basis) and modest free cash flow, which poses challenges for managing a business vulnerable to advertising spending cycles. Lack of scale also constrains the rating, although the company benefits from a station portfolio with diversity in terms of both geography and network affiliations. These assets combined with Barrington’s continued local market focus and good margins create the capacity to generate strong unlevered cash flow, but the company faces continued competition for advertising dollars related to media fragmentation.”
Barrington Broadcasting Group, LLC, headquartered in Hoffman Estates, Illinois, owns or programs 24 network television stations in 15 markets, Moody’s noted. Its net revenue for the year ended December 31, 2009, was approximately $100 million.
Here are the ratings actions that Moody’s took as it also confirmed Barrington’s SGL-3 speculative grade liquidity rating:
Barrington Broadcasting Group LLC
….Corporate Family Rating, Upgraded to B3 from Caa1
….Probability of Default Rating, Upgraded to B3 from Caa1
….Senior Subordinated Bonds, Upgraded to Caa2 from Caa3
….Senior Secured Bank Credit Facility, Upgraded to B2 from B3
….Affirmed SGL-3 Speculative Grade Liquidity Rating