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Moody's weighs in on Emmis TV sale

Following Emmis Communications' announcement that it is selling nine TV stations of 681 million bucks (8/23/05 RBR #165), Moody's Investors Service has been reviewing its debt ratings for some of the companies involved. As you'd expect, the implications are better for the seller than for the buyers.


Moody's had put Emmis under review back in May for a possible downgrade, after the company announced that it was first going to do a big stock buyback, then sell off its TV group - - increasing leverage, then decreasing it. But now that the TV sell-off is bringing in strong prices, the folks at Moody's are no longer worried. They've affirmed Emmis' ratings (including its Ba3 corporate family rating) and changed the company's outlook from "negative" to "stable." In announcing the move, Moody's said "The ratings continue to reflect the relative strength of the company's attractive radio assets (largest market stations, including New York, Los Angeles, and Chicago), and the company's renewed focus on this business segment. The ratings remain constrained by Emmis' still high leverage, the intensely competitive nature of the company's radio markets, exposure to the cyclical advertising environment, as well as, the potential for the company over the medium term to seek acquisitions in the radio space."

As the biggest buyer in the first round, at 260 million, LIN Television is now facing a possible downgrade by Moody's. "The review will focus on the incremental leverage assumed to finance the proposed acquisitions (Moody's expects leverage (defined as total

debt-to-EBITDA to increase to about 7 times); LIN's progress in integrating the acquired stations; as well as the potential return of cash to shareholders through the recently authorized share repurchase program," the ratings agency said. LIN currently has about 800 million in debt outstanding.

Moody's affirmed its ratings for Gray Television (including its Ba2 corporate

family rating), but changed its rating outlook to "negative" because of its 186 million purchase of one Emmis station. "The negative outlook reflects our expectation that leverage will increase as Gray uses debt to finance the proposed acquisition and the uncertainty regarding the final capital structure," said Moody's.

Moody's didn't issue any comment on the other buyer, Journal Communications.



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