Sinclair Broadcast Group announced a few days ago that it is increasing its bank credit facilities to fund $585 million in pending station acquisitions. Moody’s Investors Service has studied the new balance sheet and issued its ratings for the new borrowing, as well as for some existing debt.
As you would expect, all of the ratings are below investment grade levels. Moody’s assigned Ba1, LGD2 — 24% ratings to Sinclair Television Group, Inc.’s (STG) proposed $100 million1st Lien Senior Secured Revolver, $250 million incremental 1st Lien Senior Secured Term Loan A and $280 Million incremental 1st Lien Senior Secured Term Loan B.
Moody’s also downgraded ratings on the existing 1st lien senior secured term loan A due 2016 and 1st lien senior secured term loan B due 2016 to Ba1, LGD2 – 24% from Baa3, LGD2 – 12% “given that these existing credit facilities are pari passu with the new incremental term loans.” According to Moody’s, “The downgrades reflect the increase in senior secured debt balances and the relatively smaller cushion provided by 2nd lien and subordinated notes.” Moody’s also downgraded the rating on the 2nd Lien Senior Secured Notes due 2017 to B1, LGD5 – 71% from Ba3, LGD4 – 53%. In addition, Moody’s affirmed STG’s parent, Sinclair Broadcast Group, Inc.’s (Sinclair) Ba3 Corporate Family Rating, Probability of Default Rating, as well as the company’s Speculative Grade Liquidity (SGL) Rating at SGL – 2. Ratings for all other debt instrument ratings were unchanged; however, Loss-Given-Default point estimates were updated for the new mix. The rating outlook is stable.
“The Ba3 CFR reflects moderately high leverage of approximately 4.8x on a trailing 8 quarter basis through December 2012 (including Moody’s standard adjustments, or approximately 4.7x on a trailing 4 quarter basis) and incorporates higher levels of production expense attributed to increasing reverse compensation paid to its major networks. Ratings are supported by our expectations for strong political advertising for television broadcasting companies through the end of 2012 combined with EBITDA margins in excess of 30% generated by the company’s sizable and diverse television station group. Ratings incorporate our expectation that the company will achieve most of its planned synergies for the Four Points Media and Freedom acquisitions shortly after closing. Moody’s believes Sinclair will continue to generate mid-single digit free cash flow-to-debt ratios and will apply free cash flow to reduce debt balances, in the absence of additional acquisitions. The improved financial leverage (compared to 5.4x on a trailing 8 quarter basis at FYE 2010) provides some cushion to the company’s dependence on cyclical advertising spending,” Moody’s said in explaining its ratings.
Here are the ratings actions:
Assigned:
..Issuer: Sinclair Television Group, Inc.
.New $100 Million 1st Lien Senior Secured Revolver: Ba1, LGD2 — 24%
.Incremental $250 Million 1st Lien Senior Secured Term Loan A: Ba1, LGD2 — 24%
.Incremental $280 Million 1st Lien Senior Secured Term Loan B: Ba1, LGD2 — 24%
Downgraded:
..Issuer: Sinclair Television Group, Inc.
.$115 Million 1st Lien Senior Secured Term Loan A due 2016: Downgraded to Ba1, LGD2 –24% from Baa3, LGD2 — 12%
.$330 Million 1st Lien Senior Secured Term Loan B due 2016 (approximately $225 million outstanding): Downgraded to Ba1, LGD2 — 24% from Baa3, LGD2 — 12%
.$500 Million 2nd Lien Senior Secured Notes due 2017: Downgraded to B1, LGD5 — 71% from Ba3, LGD4 — 53%
Unchanged:
..Issuer: Sinclair Broadcast Group, Inc.
.Corporate Family Rating: Affirmed Ba3
.Probability of Default Rating: Affirmed Ba3
.8.375% Senior Subordinated Notes due 2018 (approximately $238 million outstanding): Affirmed B2, point estimates updated (to LGD6 — 93% from LGD6 — 91%)
.4.875% Convertible Senior Notes due 2018 (approximately $6 million outstanding): Affirmed B2, LGD6 — 96%
.Speculative Grade Liquidity Rating: Affirmed SGL — 2
Outlook Actions:
..Issuer: Sinclair Broadcast Group, Inc.
Outlook is Stable
