In its continuing parade of credit rating downgrades for television companies, Moody’s Investors Service has cut LIN Television Corporation’s corporate family rating to B2 from the previous B1. The outlook is negative, so Moody’s could downgrade LIN yet again.
“The downgrade reflects Moody’s expectation that LIN’s cash flow will weaken significantly in 2009 due to declines in advertising spending resulting from continued softening of the U.S. economy and despite increases to contractual retransmission revenues and expected strategic cost cuts. Moody’s is also concerned that lower earnings at LIN TV Corp.’s (LIN’s parent company) joint venture with NBC Universal will create pressure on LIN to contribute funds to cover the joint venture’s debt service and avoid a call on LIN TV Corp.’s guarantee of the joint venture’s debt,” the ratings agency said.
“Moody’s expects that cash flow deterioration will drive leverage considerably higher and heighten the risk of a credit facility covenant violation. Moody’s believes that the covenant relief the company received from its August 2008 amendment will afford it modest financial covenant cushion in the first half of 2009 with a higher risk of a violation in the second half of the year. However, should the company’s covenant cushion tighten in the latter half of the year, Moody’s believes that LIN’s strong local market positions, modest free cash flow generation and secured leverage will allow the company some ability to negotiate for an amendment and/or waiver, if necessary,” Moody’s added.
Moody’s has taken the following rating actions:
Issuer: LIN Television Corporation
Corporate Family rating — downgraded to B2 from B1
Probability of Default rating — downgraded to B2 from B1
$225 million Senior Secured Revolver — downgraded to Ba2 (LGD 2, 11%) from Ba1 (LGD 2, 12%)
$275 million Senior Secured Term Loan — downgraded to Ba2 (LGD 2, 11%) from Ba1 (LGD 2, 12%)
$375 million 6.5% Senior Subordinated Notes due 2013 — downgraded to B3 (LGD 4, 67%) from B2 (LGD 4, 69%)
$190 million 6.5% Senior Subordinated Notes Class B due 2013 — downgraded to B3 (LGD 4, 67%) from B2 (LGD 4, 69%)
Speculative Grade Liquidity Rating — remains at SGL-4
Outlook — revised to Negative from Review for possible downgrade