Moody’s Investors Service has affirmed its ratings on nearly a half billion dollars of debt at LBI Media, the parent company of Liberman Broadcasting. However, the ratings agency remains concerned about the advertising future and given LBI a “negative” outlook for its credit ratings. Liberman owns 22 radio stations and five television stations, all clustered in five markets: Los Angeles, Houston, Dallas-Ft. Worth, San Diego and Salt Lake City.
“Moody’s Investors Service affirmed LBI Media, Inc.’s ("LBI") B2 Corporate Family Rating and its Probability of Default Rating. In addition, Moody’s affirmed the Ba2 ratings for LBI’s $270 million senior secured credit facilities ($150 million revolving credit facility due 2012, $120 million term loan facility due 2012) and the B3 rating for the company’s $229 million Senior Subordinated Notes due 2017. The rating outlook has been revised to negative from stable,” Moody’s said.
“The negative outlook reflects Moody’s concerns that the current economic downturn and pullback in advertising spend will affect LBI’s revenue and cash flow in the near term despite its focus on the Hispanic audiences (which are expected to have favorable demographic trends over the medium- to long-term). While credit metrics are expected to come under pressure, Moody’s expects LBI to have relatively good liquidity from its $150 million revolving credit facility (approximately $15.8 million of which was drawn as of June 30, 2008). Moody’s notes the absence of financial maintenance covenants under LBI’s credit facility until June 30, 2009, at which time the company will have to comply with a senior secured leverage test (initially set at 7.00x),” the ratings agency explained.
Moody’s has taken the following ratings actions:
LBI Media, Inc.
Corporate Family Rating — affirmed B2
Probability of Default Rating — affirmed B2
$150 million Secured Revolver — affirmed Ba2 (LGD 2, 19%)
$120 Million Secured Term Loan — affirmed Ba2 (LGD 2, 19%)
$229 Million Senior Subordinated Notes due 2017 — affirmed B3 (LGD 4, 69%)
Outlook – Revised to Negative from Stable
Moody’s last rating action for LBI was in August 2008, when the company was downgraded to B2 from B1.
“The B2 rating reflects the company’s high debt to EBITDA leverage of 8.6x for the trailing twelve months ended 6/30/2008 (incorporating Moody’s standard adjustments and including the holding company LBI Media Holdings, Inc.’s unrated senior discount notes), lack of significant geographic diversification and revenue and cash flow concentration in the Los Angeles market. Additionally, LBI’s ratings reflect weaker than expected operating performance and credit metrics, its modest scale, and our expectation that the company will remain acquisitive as it seeks to expand its current station portfolio in existing and new markets,” said Moody’s.
“Nonetheless, the company’s ratings are supported by its strong margins, clustering of radio and television stations in the top Hispanic markets and concentration of local advertising revenues. In addition, Moody’s expects LBI to benefit over the intermediate to long term from the strong Hispanic demographic trends,” it added.