Nexstar is the latest television company to have its credit ratings downgraded by Moody’s Investors Service – along with a negative outlook for the future. Moody’s says it doesn’t look like retrans and Internet revenues will be able to counter the negative forces working against TV ad revenues. The Moody’s action also includes Mission Broadcasting, which has virtual duopolies with Nexstar in several markets.
“The rating downgrades and negative outlook reflect Moody’s expectation that despite potential upside from additional retransmission compensation and eMedia revenue, depressed consumer confidence, a slowdown in consumer spending, its adverse impact on corporate profits and the resulting cutbacks in advertising and marketing budgets by several industries that advertise heavily will create increasing pressure on Nexstar’s revenue and cash flow. As a result, Moody’s expects the company’s credit metrics, including debt-to-EBITDA leverage, will likely be materially negatively impacted. Partially mitigating the impact will be lower capital expenditures associated with the completion of the company’s digital conversion plus the potential for other revenue opportunities. Additionally, Moody’s believes that given the absence of material political revenue in 2009 combined with continued weakness in the advertising environment, the company will remain challenged in its ability to comply with its financial maintenance covenants, thus constraining liquidity. Moody’s also believes that successfully attaining a waiver or amendment under the credit facility may likely result in increased pricing, thereby further stressing the company’s cash flow” Moody’s said.
Moody’s has taken the following ratings actions:
Nexstar Finance Holdings, Inc.
Corporate family rating — Downgraded to B3 from B2
Probability-of-default rating — Affirmed B3
11.375% senior discounts notes due 2013 — Affirmed Caa2 (to LGD 6, 94% from LGD 5, 85%)
Speculative Grade Liquidity Assessment — Affirmed SGL-4
Nexstar Broadcasting, Inc. (including Mission Broadcasting, Inc.)
$98 million revolving credit facilities due 2012 — Downgraded to B1 from Ba2 (to LGD 2, 25% from LGD 2, 15%)
$355 million senior secured term loans due 2012 — Downgraded to B1 from Ba2 (to LGD 2, 25% from LGD 2, 15%)
7% senior subordinated notes due 2014 – Affirmed Caa1 (to LGD 5, 74% from LGD 4, 61%)
The rating outlook is negative.