Strong 2012 advertising revenues in both core categories and political allowed television group Bonten Media to bring its debt ratio down and earned it an upgrade from Moody’s Investors Service. But it still faces challenges.
Moody’s Corporate Family Rating for Bonten is now Caa1, an improvement from its previous Caa2 CFR, and similarly, its Probability of Default rating improved to Caa1-PD from Caa2-PD. Its outlook is stable.
The upgrade is based on what is still a very high leverage ratio of 8x as of the last day of 2012. But its down from 11.4x at the end of 2011 and 12.9x the year before that – hence, it is a number worthy of an upgrade.
The big spending in political benefitted the group’s stations in Montana and in the Tri-Cities WA area. Further, it locked down retransmission agreements, providing Moody’s with evidence of stability going forward.
But risks remain. Moody’s explained, “Although improved, leverage remains high and poses challenges for managing a business vulnerable to advertising spending cycles. Moody’s believes Bonten’s lack of national scale with $65 million of annual net revenues magnifies both financial and cyclical risk as well as exposure to a disproportionate impact from the loss of a large advertiser or a region specific downturn, particularly in the Tri-Cities and Eastern North Carolina markets representing 70% to 80% of cash flow.”
Bonten will have to keep getting out from under its debt overhang to earn another upgrade, said Moody’s, somewhere on the order of 6.5x.
The group owns or operates 14 stations in eight small- to mid-sized markets (according to Moody’s, they rank between #96 and #196 on the Nielsen population chart) and makes liberal use of digital side channels. Some of the stations are operated in conjunction with JSA/SSA partner Esteem Broadcasting.