Moody’s Investors Service upgraded the corporate family rating (CFR) and default rating of Allbritton Communications Company to B2 from the previous B3, as it also assigned a B2 rating to the company’s proposed issue of new senior bonds.
Allbritton intends to use proceeds from the proposed $455 million bond issuance, combined with borrowings under its revolving credit facility, to repay its existing $455 million senior subordinated bonds due December 2012 and to pay related fees, expenses, and premiums. The company is also executing an amendment to extend the maturity of its existing revolving credit facility (unrated) and to reduce the commitment to $60 million from $65 million, Moody’s noted.
“The extension of maturities (to 2018 from 2012 for the bonds and to 2013 from August 2011 for the revolver) mitigates our concerns surrounding refinancing risk, supporting the upgrade. Furthermore, Moody’s now anticipates Allbritton will sustain lower leverage over the next several years due primarily to improving operating performance as well as repayment of outstanding borrowings under the revolving credit facility,” said Moody’s.
“Allbritton’s B2 corporate family rating incorporates healthy margins and capacity to generate positive free cash flow created by its leading positions in most markets and from its news channel, tempered by the company’s high leverage and vulnerability to cyclical advertising spending. Allbritton’s lack of scale, concentration of revenue in the Washington, DC market and with a single broadcast network, and expectations that the resumption of distributions to its parent company will occur over time and will pressure free cash flow constrain the rating,” the ratings agency said. “The stable outlook reflects our expectations that the economic cycle has bottomed and conditions are mending, and Allbritton will maintain leverage below 6 times debt-to-EBITDA and generate cash flow from operations less capital expenditures-to-debt of approximately 5%. The outlook and B2 corporate family rating incorporate some tolerance for the resumption of dividends provided the company funds them with free cash flow and maintains leverage below 6 times.”
Allbritton Communications Company
….Senior Unsecured Bonds, Assigned B2, LGD4, 57%
….Probability of Default Rating, Upgraded to B2 from B3
….Corporate Family Rating, Upgraded to B2 from B3