As a privately owned TV group operating in eight markets, we don’t often get to see much financial data about New Vision. But the company recently completed an $85 million refinancing, so the analysis from Moody’s Investor Services provided a peak inside the company.
As you would expect, the TV group received credit ratings a few notches below investment grade. NVT Networks LLC is the new name for the company following its emergence in September 2009 from a Chapter 11 reorganization that converted most of its debt to equity. Moody’s has now assigned a B1 Corporate Family Rating (CFR) and a B2 Probability-of-Default Rating. Additionally, a B1 debt instrument rating and LGD3, 35% assessment were assigned to the company’s proposed $10 million senior secured first lien revolver and $75 million senior secured first lien term loan. The new revolver and term loan will be used to refinance the existing $68.5 million term loan and revolver, Moody’s said in its ratings statement.
“The B1 Corporate Family Rating (CFR) reflects the company’s high initial debt-to-EBITDA leverage of 4.5x estimated for the 12 months ending December 2011, lack of national scale and diversity as well as reliance on political advertising demand in even numbered years. Political revenues account for approximately 14-16% of New Vision’s total revenues in even numbered years and make up an even larger percentage of EBITDA,” Moody’s said.
“Ratings are supported by our view that credit metrics should improve due to an expected low to mid-single digit increase in core advertising over the rating horizon, the potential for higher retransmission fees as contracts are renegotiated towards the end of 2011, and the return of political advertising demand in 2012, a presidential and Summer Olympic year. The company is ranked #1 or #2 in four of its markets with key stations in diverse locations including Portland, Honolulu, Youngstown, and Birmingham,” the ratings agency said.
“Typical of most broadcasters, New Vision faces risks associated with the cyclical nature of television advertising demand and fragmentation of media outlets . In addition, we believe the volatile nature of the company’s earnings, due to its relatively high level of political revenues, increases risks related to unexpected changes in regulations governing political campaign spending. Also supporting the rating is its good collateral coverage as well as the proposed requirements under the credit agreement including increased term loan amortization of 5% in even numbered years and 75% excess cash flow sweep. The company’s liquidity is expected to be good over the rating horizon despite proposed increased term loan amortization in even numbered years,” said the analysis.
New Vision owns and operates 10 Big Four network affiliated television stations and provides joint sales and shared services to three other network affiliates located in eight markets, Moody’s noted. According to credit rating announcement, New Vision generated $132 million in gross revenues and $30 million in EBITDA for the year ended December 2010.