Sinclair reworking some more debt


The Sinclair Television Group subsidiary of Sinclair Broadcast Group is refinancing its credit facilities. Moody’s Investors Service likes the terms, but for now is holding steady on its credit ratings for the company.

The new credit facilities consist of a new $100 million Term Loan A and a new $240 million, both due 2016. The proposed new credit facilities include lower pricing and extended maturities compared to the existing Term Loan B facility (LIBOR +4.0%) due 2015, Moody’s noted. It said the current indication is that the new Term Loan A will price at LIBOR + 2.25% and the new Term Loan B at LIBOR +3.25%. The proceeds will be used to refinance the existing Term Loan B facility, of which $270 million is outstanding, and to call the remaining $70 million of 6% convertible debentures due 2012 issued by the parent company.

Moody’s assigned Baa3 ratings to the new term loans. It also affirmed the Ba3 Corporate Family
Rating (CFR) and Ba3 Probability-of-Default Rating (PDR), for Sinclair Broadcast Group.

“We note that despite Moody’s projected decrease in revenues and EBITDA for 2011, due largely to the absence of record levels of political ad spending in 2010, we expect debt-to-EBITDA ratios will remain within existing financial covenants. Providing further stability,
Sinclair recently renewed its affiliation agreement with Fox and entered into a multi-year carriage deal with Time Warner Cable, providing a 12-24 month window before significant agreements will need to be negotiated. In the event of an extended NFL lockout for the 2011-2012 season, we believe the net impact would not be significant,” Moody’s said in its analysis.

Sinclair reported this month that its revenues were up 23.5% in Q4. The company also reinstated its dividend payments to shareholders.

What about the future?

“We would consider a downgrade if debt-to-EBITDA ratios were sustained above 5.75x (incorporating Moody’s standard adjustments) as a result of deteriorating operating performance due to weak advertising demand or as a result of acquisitions, distributions or liquidity becoming strained due to deteriorating covenant cushion or reduced revolver availability in the absence of adequate cash balances. We would consider a potential upgrade of the CFR if Sinclair’s debt-to-EBITDA ratio were sustained comfortably below 4.25x with free cash flow-to-debt ratios in the high single digit range and good liquidity,” Moody’s said of Sinclair.