Moody's clips Sinclair's debt outlook
In addition to the political fallout from last Friday's airing of a news program focusing on POWs critical of Democratic presidential candidate John Kerry, Sinclair Broadcast Group has been paying a financial toll. Some advertisers pulled their spots, the company's stock price took a hit and now Moody's Investors Service has lowered its outlook for the company's debt rating, citing corporate management's "intervention" in station programming decisions.
Moody's changed its outlook for Sinclair from "stable" stable to "negative" based on lower than expected revenues for 2004, "followed by the likelihood of still lower revenues in 2005, a non-election year, and concerns regarding management focus as evidenced by its intervention in its stations' traditional programming, exacerbating concerns regarding the weaker than expected operating environment and corporate governance." Moody's also noted that the company's debt-to-EBITDA ratio is close to eight times and its interest coverage is under two times - - factors which the ratings agency said made it "weakly positioned" for its rating category.
" In Moody's opinion, Sinclair management risked its relationship with many important constituencies, including advertisers as well as debt and equity stakeholders in order to run a controversial news special. The controversial programming appeared to have a detrimental affect on its relationship with advertisers who did not want to be affiliated with the news special. Notably, Moody's does not currently anticipate a material
financial impact as a result of the news special," the ratings agency said. Moody's warned that should Sinclair's credit metrics not improve measurably in the next 12-18 months, its ratings may be lowered.
Moody's announced that it had:
--Lowered Sinclair's speculative grade liquidity rating to SGL-3 from SGL-2 mostly to reflect increased concerns regarding the company's flexibility under its bank covenants,
--Changed its rating outlook to negative from stable,
--Affirmed its Ba2 rating on $625 million of senior secured credit facilities,
--Affirmed its B2 rating on $835 million of senior subordinated notes,
--Affirmed its B3 rating on $100 million of convertible senior subordinated notes,
--Affirmed its Caa1 rating on $173 million of preferred stock,
--Affirmed its Ba3 senior implied rating, and
--Affirmed its Ba3 senior unsecured issuer rating.
Are you reading this from a forwarded email?
