Moody's unfazed by Nexstar sale process


Moody’s Investors Service has taken note of the announcement by Nexstar Broadcasting’s announcement that it is exploring “strategic alternatives,” including a possible sale of the company. Moody’s says Nexstar’s credit ratings aren’t impacted by the news – at least not for now.

Nexstar’s borrowings are under its Nexstar Finance Holdings, Inc. wholly owned subsidiary. Moody’s said the decision to hire a financial advisor to explore strategic alternatives “does not impact the B3 corporate family rating of Nexstar Finance Holdings, Inc. given the absence of a timeframe and lack of clarity on possible outcomes.”

What happens to Moody’s ratings on Nexstar’s debt will depend on who the buyer is, if there is indeed a sale.

“A sale to a private equity sponsor could increase leverage and negatively impact the credit profile, whereas a sale to a strategic operator, depending on the financing, could enhance scale and improve the credit profile. Moody’s will continue to monitor developments in the process and comment as more information becomes available,” the ratings agency said.

Moody’s noted that Nexstar had revenues of $313 million last year from its 63 owned and/or operated TV stations.

From that $313 million in revenues, Nexstar reported $132 million in broadcast cash flow and $112 million of adjusted EBITDA. It had $643 million of total debt at the end of 2010.

More recently, when Nexstar reported Q1 results CEO Perry Sook pitched the company as a free cash flow (FCF) machine. He predicted that the company will produce more than $100 million in FCF for the 2011-2012 cycle, including next year’s federal elections. FCF for 2010 was $60 million.