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11 May 2011
Approximately $727 million of rated debt affected
New York, May 11, 2011 -- Moody's Investors Service upgraded Newport Television Holdings LLC's
("Newport") Corporate Family and Probability of Default Ratings
to Caa1 from Caa2. Additionally, Moody's upgraded Newport
Television LLC's senior secured credit facilities to B2 from B3
and affirmed the Caa3 rating of its senior PIK notes. The upgrades
reflect improved operating performance through March 31, 2011 and
lower debt-to-EBITDA leverage as well as expectations for
positive free cash flow over the next 12 months. The outlook has
been revised to stable.
.Issuer - Newport Television Holdings LLC
Corporate family rating -- Upgraded to Caa1 from Caa2
.Probability-of-default rating -- Upgraded
to Caa1 from Caa2
.Issuer - Newport Television LLC
.Senior Secured Revolver due 2016 -- Upgraded
to B2 from B3 (to LGD 3, 31% from LGD 3, 32%)
.Senior Secured Term Loan due 2016 -- Upgraded
to B2 from B3 (to LGD 3, 31% from LGD 3, 32%)
..Unchanged (point estimates updated):
.Issuer - Newport Television LLC
.Senior PIK Toggle Notes due 2017 -- Affirmed
Caa3 (to LGD 5, 85% from LGD 5, 86%)
Rating outlook revised to stable
Newport's Caa1 corporate family rating reflects our expectation that trailing
8 quarter debt-to-EBITDA ratios (includes consecutive political
and non-political years) will remain in a 7.0x -7.5x
range over the rating horizon with the potential for free cash flow generation
of more than $30 million per year or 4% of debt balances
through the first half of 2013. Ratings are constrained by the
high 13%/13.75% coupon on the PIK notes due 2017
given that free cash flow would fall below these levels to the extent
the company refinances a portion of these notes with cash pay debt or
chooses to pay cash for a portion of interest expense on these PIK notes.
After March 2013, interest on the PIK notes is required to be paid
in cash, resulting in an increase in cash interest by as much as
$33 - $42 million per year and reducing free cash
flow-to-debt ratios to less than 1%.
Core, non-political, advertising revenues are expected
to increase in the low-to-mid single digit range over the
rating horizon as the economy continues to recover and advertising spending
continues to be fragmented over a growing number of media outlets.
Beyond 2011, we expect high demand for political advertising in
2012 to boost revenues for television broadcasters. We believe
Newport should be able to generate strong political advertising revenues
given the location of its stations in key election states and track record
in even numbered, political years. In addition to growth
in core advertising revenues, we expect the company to benefit from
new retransmission agreements with MVPD's (cable, satellite
or telco distributors) not previously under contract or as agreements
get repriced. Ratings are also supported by the diversity of Newport's
geographic footprint and affiliations across the four major networks,
and 60-70% proportion of local advertising revenues.
Moody's believes that Newport has an experienced management team,
but faces a difficult challenge in executing its strategy of growing revenues
and increasing market share while contending with high debt levels and
escalating cash interest payments associated with the PIK notes or their
The stable outlook reflects our view that operating performance and credit
metrics will remain in line with expectations over the rating horizon
with trailing 8 quarter debt-to-EBITDA ratios remaining
below 7.8x (including Moody's standard adjustments) and accommodates
the expected decrease in consolidated revenue in 2011 due to the absence
of significant political revenues during odd numbered years. The
stable outlook also incorporates the potential for refinancing of the
PIK notes with cash pay debt, the resulting increase in cash interest
expense and reduction in free cash flow-to-debt ratios to
less than 1%.
Ratings could be upgraded if revenue and EBITDA growth results in trailing
8 quarter debt-to-EBITDA ratios being sustained below 7.0x
(including Moody's standard adjustments) with free cash flow-to
debt ratios expected to remain in mid-single digits after 2013
when the PIK notes become 100% cash pay. Liquidity would
also need to remain adequate. Ratings could be downgraded if revenue
or EBITDA were to decline due to performance below expectations resulting
in the inability to reduce debt balances, increasing leverage or
free cash flow-to-debt ratios below 1%. Deterioration
in liquidity could also result in a downgrade.
The principal methodology used in rating Newport was Moody's Global Broadcast
Industry, published in June 2008.
Newport Television Holdings LLC ("Newport"), headquartered in Kansas
City, Missouri, owns or operates 32 primary television stations
plus 28 digital multicast stations in 22 markets including 8 duopolies
and 12 additional multi-station markets. Newport has been
a portfolio company of Providence Equity Partners, Inc. since
it was formed to acquire the television group of Clear Channel Communications,
Inc. in 2008. Revenues for the trailing twelve months ended
March 31, 2011 totaled $323 million.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
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a credit rating.
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Please see ratings tab on the issuer/entity page on Moodys.com
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The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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Please see the ratings disclosure page on our website www.moodys.com
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of each rating category and the definition of default and recovery.
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service
Senior Vice President
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Upgraded Newport's CFR to Caa1; Outlook Revised to Stable
250 Greenwich Street
New York, NY 10007
No Related Data.
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