A series of financial instruments in the Local TV debt portfolio have earned a B1 rating from Wall Street umpire Moody’s Investors Service. The analyst likes the company’s prospects, but is wary of its overall leverage.
Included in the B1 rating are a 1st lien senior secured revolver due May 2015, 1st lien senior secured term loan due May 2013, and 1st lien senior secured term loan due 2015 including the proposed $70 million incremental portion to fund a special dividend.
Local TV is rated as stable with a B3 Corporate Family Rating and a B3 Probability of Default Rating. Senior toggle notes due June 2015 are rated Caa2.
On the plus side of the ledger for Local TV is ab expected revenue gain of 15% in 2012 thanks to the wealth of political spending going into its coffers; and the odd-year revenue downturn is expected to be mitigated by gains in retransmission consent income.
Also in the company’s favor is a diverse package of network affiliations, shielding it from the effects of an off-year for any one network.
But here’s the other side of the coin. Moody’s said, “We believe the company needs to reduce debt balances given expected revenue declines in non-election years, vulnerability to economic cycles, and need to refinance all debt instruments in 2015. Local TV faces increased competition for advertising dollars due to ongoing media fragmentation. Furthermore, ratings are constrained by its lack of national or regional scale and the likelihood of additional dividends in the near term.”
It retains its “stable” rating, said Moody’s in part because its core advertising is expected to rise along with its retransmission income.
RBR-TVBR observation: This should be an encouraging assessment for television broadcasters in general. Most if not all television groups should enjoy the same short term gains in retrans and core advertising to which Local TV is looking forward.