Hubbard Radio has had its Corporate Family Rating promoted from B2 to B1 by Moody’s Investors Service, based on solid operations and success in paying down debt. The Wall Street ump praised Hubbard’s success competing against big players in Washington and Chicago.
The company has been shifting its financing around in a way that actually resulted in a downgrade from Moody’s – it says it will rob the company of some cushion – but it’s outlook remains stable and Moody’s had mostly good things to say about the state of Hubbard’s financial health.
The company’s current 4.7x leverage level is seen as being moderately high – but when compared to the 5.6x it had been, Moody’s sees the movement going in the correct direction.
The instability built into the broadcast business model is a factor, including consideration of “…media fragmentation and the cyclical nature of radio advertising demand,” and the risk the stations face if the nation suffers an economic downturn. But that said, Moody’s noted, “The company’s leading brands have withstood heightened competition from large radio broadcasters, especially in Washington, D.C. and Chicago.”
Still, continued competitive pressure could produce a negative effect on the company revenue results.
Although Hubbard could be downgraded in the event of weak advertising demand or increased competition, Moody’s considers it to be a stable company. It stated, “The stable outlook reflects our view that Hubbard will continue to grow core advertising revenues over the next 12 months with stations in key markets, Chicago and Washington, D.C., remaining leaders in their formats. The outlook also incorporates our expectation for the company to maintain debt-to-EBITDA ratios below 5.0x (including Moody’s standard adjustments) with good liquidity including free cash flow-to-debt ratios of more than 10% over the next 12-18 months with potential dividends to be paid from excess cash.”
RBR-TVBR observation: Hubbard bought a radio group with a tradition of stability. That was certainly one of the hallmarks of Bonneville, which is the source for Hubbard’s radio core. Hubbard must be gratified to get recognition that it is following in Bonneville’s footsteps from a respected Wall Street observer.