Moody’s Investors Service placed the ratings of Entravision Communications Corporation on review for possible downgrade following the company’s Q4 earnings report. Moody’s had been expecting stronger results from the Spanish radio and TV company.
“The review is driven primarily by the company’s continued high debt-to-EBITDA ratios, minimal cushion to financial covenants under its revolver agreement (in effect only if drawn), and Moody’s view that the company will need more time than initially expected to bring financial metrics in line with the B1 corporate family rating,” the ratings agency said. Entravision has approximately $434 million of debt rated by Moody’s.
“Recently reported financial results for Entravision were below Moody’s expectations for the 4th quarter of 2011. As a result, the company will need more time than initially anticipated to bring financial metrics, including debt-to-EBITDA ratios (approximately 7.0x as of December 2011 or 6.1x net debt-to-EBITDA, including Moody’s standard adjustments) and free cash flow-to debt ratios (roughly 1% at December 2011) in line with the B1 rating category. Although paid out of excess cash and in conjunction with a $16.2 million debt repurchase, Moody’s is concerned that the company and its board chose to fund a $5.1 million dividend in December 2011 in the face of operating performance below expectations and the decision to loosen leverage test requirements under its revolver due to minimal EBITDA cushion. Moody’s review of ratings will focus on Entravision’s television and radio broadcasting operations over the next 12 — 18 months and will consider the company’s ability to reduce debt-to-EBITDA ratios while maintaining at least adequate liquidity including EBITDA cushion to financial covenants,” said the statement from Moody’s.
On Review for Possible Downgrade:
Issuer: Entravision Communications Corporation
..Corporate Family Rating: Placed on Review for Possible Downgrade, currently B1
..Probability of Default Rating: Placed on Review for Possible Downgrade, currently B1
….$50 Million 1st Lien Senior Secured Revolver due 2013: Placed on Review for Possible Downgrade, currently B1, LGD3 — 31%
….Senior Notes due 2017 (approximately $384 million outstanding): Placed on Review for Possible Downgrade, currently B1, LGD4 — 51%
….Outlook, Changed To Rating Under Review From Stable