Among the uses Sinclair has for $500M in cold hard cash is paying down debt and perhaps offering a special dividend to its loyal shareholders, but mostly it’s going to fund a slate of recent acquisitions. Wall Street ump Moody’s likes the new cushion created by a 2022 maturity date.
The senior secured notes will be guaranteed by Sinclair and its subsidiaries.
“The net proceeds from the private placement of Notes are intended to fund the acquisition of Newport Television and other pending acquisitions, to pay down outstanding indebtedness under STG’s revolving credit facility, and for general corporate purposes, which may include a distribution to Sinclair to be paid to Sinclair’s shareholders in the form of a special dividend,” explained the company. “The issuance of the Notes is not contingent upon the consummation of the pending acquisitions. In the event that the pending acquisitions are not completed, then we expect to use the net proceeds from this offering to reduce outstanding indebtedness and for general corporate purposes.”
Moody’s said the move improves the ratings of other, earlier-maturing financial instruments, and leaves the company’s Corporate Family Rating and Probability of Default Rating unchanged at Ba3.
Moody’s noted, “The proposed notes are being issued primarily to purchase six television stations from Newport Television ($412.5 million), the assets of Bay Television, Inc. ($40 million), KBTV in Port Arthur, TX ($14 million), and WUTD in Baltimore, MD ($2.7 million).”
Moody’s explained its rating, saying, “The pending transactions represent Sinclair’s continued investment to expand the company’s footprint currently reaching 26% of U.S. households while further diversifying revenues by geographic market and network affiliations. Ratings incorporate strong demand for political advertising during election years, most recently resulting in markedly higher EBITDA growth for Sinclair through the end of 2012.”
Moody’s expects Sinclair to continue to work to improve its leverage, and noted that failure to do so will risk a down-graded rating.
RBR-TVBR observation: The six-station buy from Newport Television is worth more than 80% of that amount all by itself. That said, the acquisition seems like a smart move to us. The fact is that station pricing is starting to inch back up compared to the past few years, but at the same time it is still nowhere near the levels of the late 90’s and early 00’s. Prices seem to have just made it back to the point where sellers will consider letting stations go, but are likely still on the low side of where they might be headed. That is, of course, assuming that broadcasters aren’t finally finished off by internet competition or FCC spectrum repurposing…
