The leverage being carried by television group Bonten Media Group is higher than Moody’s Investor Service likes, and its lack of scale increases its vulnerability to any kind of serious reversal, but that said, the leverage is shrinking and the company’s latest Moody’s report card is good.
After making some financial moves, Bonten has received a Corporate Family Rating of Caa1and a Caa1-PD Probability of Default rating. The really good news is that its outlook is positive.
Moody’s analyst Carl Salas pegs current leverage at 7.2x as of 6/30/13, which is high, but it compares very favorably to the FYE2011 level of 11.4x and the FYE2010 level of 12.9x. In addition to bringing down its debt burden, the company has improved EBITDA by 70% during the period, partly thanks to the attainment of battleground status in the Montana, where Bonten has a significant presence, and also in the Tri-Cities, Washington area.
Salas spelled out the challenges facing the company, saying, “Moody’s believes Bonten’s lack of national scale with less than $70 million of annual net revenues magnifies both financial and cyclical risk as well as exposure to a disproportionate impact from the loss of a large advertiser or a region specific downturn, particularly in the Tri-Cities and Eastern North Carolina markets representing 70% to 80% of cash flow.”
The risks, however, are mitigated by the company’s number one standing among local television operators in six of its eight markets.
Bonten will face the perennial challenge affecting all television groups – dealing with the two-year political revenue roller-coaster. Moody’s also believes that the prospects for increasing revenue via better retransmission consent deals will be compromised by higher reverse compensation fees going to the networks to which it is affiliated.
Salas said the positive outlook is based on its expectation that Bonten will continue to pay down debt, will enjoy solid results among certain core advertising groups not the least of which will be members of the automotive category, and will enjoy another solid political year in 2014.