High yield bond analysts Bishop Cheen and Davis Hebert at Wachovia Capital Markets have published a massive 2009 outlook. The document provides an in-depth discussion of the challenges facing advertising, radio, television, outdoor and music/live entertainment. With so many companies to look at, what do they like as a place to invest in media bonds? Not much.
“Given the predictable cycle of TV and the seemingly perennial challenge of turning around Radio, we are taking a more defensive posture by being more credit-specific than sector-centric. We like strong balance sheets without near-term credit default triggers, committed sponsors and veteran management teams that understand a simple concept – less debt actually means more equity. As for recovery, we think Outdoor and TV will stabilize in 2010 more readily than Radio or Directories, which have problems that, in our opinion, may be more secular than cyclical,” the analysts wrote.
Cheen and Hebert upgraded their recommendations on the bonds of two companies. Block Communications, which owns newspapers, cable and TV stations, was upgraded to Outperform from Market Perform. The analysts said the company “will likely rely on its stable cable cash cow to fund losses at its newspaper segment and maintain what is one of the most conservative balance sheets in our coverage universe.” They also upgraded Fisher Communications to Market Perform from Underpertform, citing its stability but warning that “we could change our tune if Fisher were to make an ill-advised acquisition in this environment.”
RBR/TVBR looked through the long list of high-yield issues that the Wachovia team follows. In addition to Block, the list of bonds rated Outperform is short: Nielsen Finance LLC. That’s it. Two total.