Moody’s likes Nexstar’s deal with banks


Moody’s Investors Service upgraded its “speculative-grade liquidity rating” for Nexstar’s wholly owned Nexstar Finance Holdings subsidiary. That came after the company disclosed in an SEC filing that it had gotten some covenant relief from its lenders.

Moody’s boosted the speculative-grade liquidity rating to SGL-3 from SGL-4. The amendment to Nexstar’s senior secured credit facility will provide additional covenant headroom through March 2011, the rating agency noted. Nexstar’s Caa1 Corporate Family Rating (CFR), Caa2 Probability of Default Rating, debt instrument ratings and negative rating outlook are not affected.

Nexstar’s SEC filing said it had completed an amendment dated October 8, 2009 to its senior secured credit facilities (including the Mission Broadcasting, Inc. facility) that loosened the total leverage and senior leverage financial ratio maintenance tests through March 2011. The amendment also provided a limited one-time waiver of any covenant breach for the period from July 1, 2009 through the amendment effective date and permits the incurrence of new first lien and second lien secured notes as long as proceeds are used to repay the current term loan and revolver, Moody’s said in summarizing the key points.

“Nexstar’s total leverage and senior leverage covenants will loosen progressively to 10.25x and 7.5x in June 2010, respectively, before tightening thereafter and returning to pre-amendment levels in April 2011. The amendment has allayed Moody’s concerns that the company would otherwise violate its covenants in 2009. Nonetheless, Moody’s still considers covenant default risk will become elevated once covenant levels begin to tighten and return to pre-amendment levels. The liquidity rating would likely be lowered to SGL-4 again if the prospect of a covenant breach within the roughly 12-month liquidity window were to increase,” Moody’s said.

“Nexstar’s Caa1 CFR continues to reflect Nexstar’s high debt-to-EBITDA leverage (approximately 8.4x LTM June 2009 incorporating Moody’s standard adjustments) and modest liquidity profile, and our view that Nexstar is dependent upon a rebound in the economy to avoid a restructuring over the next two years,” Moody’s added.

Details of the rating action are as follows:


..Issuer: Nexstar Finance Holdings, Inc.

….Speculative Grade Liquidity Rating, Upgraded to SGL-3 from SGL-4