Positive Moody-swing for Emmis

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Emmis CommunicationsThe income Emmis is picking up from the LMA of its 98.7 MHz New York City radio station has inspired Moody’s Investors Service to upgrade the firm. It also called the company “stable.”


The station was WRKS-FM at the time Moody’s struck a deal to LMA it to the Walt Disney Company to use as an ESPN outlet. It now goes by the calls WEPN.

In addition to LMAing the actually station, Emmis sold its Kiss FM intellectual property to YMF Media, which will use it on one of the stations it is getting in its acquisition of Inner City properties.

Moody’s thought the whole thing was good enough to take the company from a Caa3 rating up to B3. It also upgraded various other Emmis financial instruments.

Moody’s wrote, “The upgrades reflect meaningful debt reduction most recently with cash proceeds from the securitization of KissFM’s LMA (Local Programming and Marketing Agreement) payment stream resulting in improved credit metrics.”

That said, Moody’s says Emmis’ work isn’t yet done. “We believe Emmis needs to further reduce leverage to partially offset risks related to the maturing demand for radio advertising, media fragmentation and potential for increased competition within its radio markets. Furthermore, Emmis has geographic concentration risk and relies on Los Angeles for approximately 40% of its domestic radio BCF with another 40% of radio BCF generated by New York and Austin,” stated Carl Salas, Moody’s Vice President and Senior Analyst.

Here is the blow-by-blow report from Moody’s.

Upgraded:
Issuer: Emmis Communications Corporation
* Corporate Family Rating: Upgraded to B3 from Caa2
* Probability of Default Rating: Upgraded to B3 from Caa3
* Series A Cumulative Preferred Stock ($47 million outstanding):
* Upgraded to Caa2, LGD6 — 99% from Ca, LGD6 — 98%
Affirmed:
* Speculative Grade Liquidity (SGL) Rating: Affirmed SGL–3
Outlook Actions:
* Outlook, changed to stable from ratings under review
Upgraded:
Issuer: Emmis Operating Company
* Sr secured 1st lien revolver due 2012: Upgraded to B2, LGD3 — 39% from Caa2, LGD3 — 35%
* Sr secured 1st lien term loan due 2013 ($61.6 million outstanding):
Upgraded to B2, LGD3 — 39% from Caa2, LGD3 — 35%
* Sr secured 1st lien term loan due 2014 ($77.2 million outstanding):
Upgraded to B2, LGD3 — 39% from Caa2, LGD3 — 35%