Belo gets an upgrade from Moody's


Moody’s Investors Service has reviewed the creditworthiness of Belo Corporation and bumped the TV company’s Corporate Family Rating (CFR) to Ba2. That’s just two notches below an investment grade rating, although Belo’s publicly traded bonds are another step or two back.

In all, Moody’s rated $877 million of Belo’s debt.

Moody’s said it upgraded the CFR and Probability of Default Rating (PDR) each to Ba2 from Ba3. Moody’s also upgraded Belo’s $250 million of 6.75% Notes, $200 million of 7.75% Senior Debentures and $250 million of 7.25% Debentures each to Ba3, LGD5 – 70% from B1, LGD5 – 72%.
“The upgrades reflect the company’s improved operating performance and credit metrics as well as management’s stated strategy to reduce leverage. Moody’s also changed the rating outlook to stable from positive,” the ratings agency announced. Belo’s $275 million of 8% Guaranteed Senior Notes were affirmed at Ba1, LGD2 – 23% and the Speculative Grade Liquidity Rating
(SGL) is unchanged at SGL – 2.

According to the Moody’s analysis, Belo’s Ba2 CFR is based on its consistently leading market position in local broadcast television that generates solid profit margins and good cash flow, as well as management’s focus on maintaining leverage below 4x.

“Belo generates the majority of its revenue from cyclical advertising spending, but ratings are supported by its good liquidity position that provides flexibility should the economy weaken again. Two-year average debt-to-EBITDA ratios of approximately 4.4x estimated for December 31, 2011 (including Moody’s standard adjustments) reflect consistent improvement, and we believe debt-to-EBITDA ratios will improve further given our expectations for significant political advertising demand in 2012 combined with management’s intentions to further reduce debt balances,” said Carl Salas, Moody’s VP and Senior Analyst.

The Moody’s ratings incorporate the potential for Belo to gradually increase its cash distributions to shareholders, but the ratings agency projects that free cash flow will remain in the mid to high-single digit range over the rating horizon with the boost from Olympics and political revenue in 2012.

“The stable rating outlook reflects our expectation that Belo will maintain 2-year average, debt-to-EBITDA ratios below 4.5x (including Moody’s standard adjustments) and 2-year average, mid-single digit free cash flow-to-debt ratios. The outlook incorporates the potential for Belo to increase its dividend payout as operating performance improves and to fund a modest level of share repurchases with excess cash.


..Issuer: Belo Corp.

….Corporate Family Rating: Upgraded to Ba2 from Ba3

….Probability of Default Rating: Upgraded to Ba2 from Ba3

…6.75% Notes due May 2013 ($175.7 million outstanding): Upgraded to Ba3, LGD5 — 70% from B1, LGD5 — 72%

…7.75% Senior Debentures due June 2027 ($200 million outstanding): Upgraded to Ba3, LGD5 — 70% from B1, LGD5 — 72%

…7.25% Debentures due September 2027 ($240 million outstanding): Upgraded to Ba3, LGD5 — 70% from B1, LGD5 — 72%


..Issuer: Belo Corp.

…8% Guaranteed Senior Notes due November 2016 ($270.9 million outstanding): Affirmed Ba1, LGD2 — 23%

……Speculative Grade Liquidity Rating: Affirmed SGL — 2

Outlook Actions:

..Issuer: Belo Corp.

……Outlook, Changed to Stable from Positive

RBR-TVBR observation: Yet another indication that Belo is likely to raise its dividend this year, as suggested last month by Wells Fargo Securities analyst Marci Ryvicker. We can’t disagree with the logic, especially since Moody’s has flagged that a dividend increase wouldn’t impact its credit ratings for Belo.