The suite of ratings assigned to Gannett Co. by Moody’s Investors Service will not need to be adjusted as it takes on debt to finance its complete takeover of Cars.com. Despite initially moving leverage in the wrong direction, Gannett’s reliance on broadcast and digital businesses and the absence of a print-based anchor figure to improve overall results.
The company’s Corporate Family Rating remains at Ba1. Moody’s explained that it “…reflects the favorable revenue shift to higher growth broadcast and digital businesses and away from lower margin publishing operations which partially offsets the negative credit impact from the increase in leverage and weakening of coverage ratios due to the Cars.com acquisition followed by the publishing spin-off.”
Leverage in the form of debt-to-EBITDA will increase marginally, from 3.4x as of 6/30/14 to 3.6x, and even that negative will be offset by losing the drag from print, enabling consistent free cash flow generation and debt repayment ability.
Interestingly, however, is Moody’s speculation that Gannett may put off debt repayment, preferring to continue to dip into what figures to be an active television trading environment over the course of the next few years.
RBR-TVBR observation: It is ironic that by the time the FCC gets around to loosening the restrictions on local broadcast and print consolidation, there will be hardly any meaningful examples left. Those that had such operations in place via waiver, grandfathering or some other means can’t seem to break them up fast enough.
Broadcasters in general can take heart in the faith Moody’s has for the medium, which is in complete contrast with its lack of faith in broadcasting’s old newsprint competitors.