$5.5 billion of rated debt affected; increase in debt balances to fund Media General acquisition
New York, May 31, 2016 -- Moody's Investors Service ("Moody's") affirmed the B1 Corporate Family
Rating of Nexstar Broadcasting, Inc. ("Nexstar").
Moody's also assigned Ba3 to the company's proposed sr secured revolving
and term loan credit facilities. Proceeds from the new debt facilities
will be used largely to repay debt of Media General, Inc.
("Media General") and to fund the cash portion of the $4.6
billion acquisition expected to close by year end. Moody's also
affirmed the company's B1-PD Probability of Default Rating and
SGL-2 Speculative Grade Liquidity Rating. The rating outlook
is stable. After closing, the company's parent (Nexstar
Broadcasting Group, Inc.) will be renamed Nexstar Media Group,
Inc., and Moody's will withdraw existing debt ratings
of Media General as well as of certain debt instruments of Nexstar upon
repayment.
Assignments:
..Issuer: Nexstar Broadcasting, Inc.
....Sr Secured Revolving Credit Facility ($175
million), Assigned Ba3 (LGD3)
....Sr Secured Term Loan A-1 ($270
million), Assigned Ba3 (LGD3)
....Sr Secured Term Loan A-2 ($250
million cash flow bridge), Assigned Ba3 (LGD3)
....Sr Secured Term Loan B ($2,850
million), Assigned Ba3 (LGD3)
....Sr Secured Bridge Term Loan ($1,180
million), Assigned Ba3 (LGD3)
Assignments:
..Issuer: Mission Broadcasting, Inc.
....Sr Secured Revolving Credit Facility,
Assigned Ba3 (LGD3)
....Sr Secured Term Loan B, Assigned
Ba3 (LGD3)
Outlook Actions:
..Issuer: Mission Broadcasting, Inc.
....Outlook, Remains Stable
Assignments:
..Issuer: Marshall Broadcasting Group, Inc.
....Sr Secured Revolving Credit Facility,
Assigned Ba3 (LGD3)
....Sr Secured Term Loan A-1,
Assigned Ba3 (LGD3)
Outlook Actions:
..Issuer: Marshall Broadcasting Group, Inc.
....Outlook, Remains Stable
Assignments:
..Issuer: Shield Media LLC
....Sr Secured Revolving Credit Facility,
Assigned Ba3 (LGD3)
....Sr Secured Term Loan A-1,
Assigned Ba3 (LGD3)
Outlook Actions:
..Issuer: Shield Media LLC
....Outlook, Remains Stable
Affirmations:
..Issuer: Nexstar Broadcasting, Inc.
.... Probability of Default Rating,
Affirmed B1-PD
.... Corporate Family Rating, Affirmed
B1
.... Sr Unsecured 6.875% Notes
due 2020, Affirmed B3 to (LGD6) from (LGD5)
.... Sr Unsecured 6.125% Notes
due 2022, Affirmed B3 to (LGD6) from (LGD5)
.... Speculative Grade Liquidity Rating,
Affirmed SGL-2
Outlook Actions:
..Issuer: Nexstar Broadcasting, Inc.
....Outlook, Remains Stable
Ratings to be Withdrawn upon repayment:
..Issuer: Nexstar Broadcasting, Inc.
....Sr Secured Revolving Credit Facility due
2017, Ba2 (LGD2)
....Sr Secured Term Loan A due 2018,
Ba2 (LGD2)
....Sr Secured Term Loan B due 2020,
Assigned Ba2 (LGD2)
..Issuer: Mission Broadcasting, Inc.
....Sr Secured Revolving Credit Facility due
2017, Ba2 (LGD2)
....Sr Secured Term Loan B2 due 2020,
Ba2 (LGD2)
..Issuer: Marshall Broadcasting Group, Inc.
....Gtd Sr Secured Term Loan A due 2018,
Ba2 (LGD2)
....Gtd Sr Secured Revolving Credit Facility
due 2017, Ba2 (LGD2)
..Issuer: Media General, Inc.
.... Probability of Default Rating,
B1-PD
.... Corporate Family Rating, B1
.... Speculative Grade Liquidity Rating,
SGL-2
....Outlook, Stable
..Issuer: LIN Television Corporation
....Gtd Sr Global Notes due 2021, B3
(LGD5)
....Outlook, Positive
..Issuer: MGOC, Inc.
....Sr Secured 1st Lien Revolving Credit Facility
due 2019, Ba3 (LGD3)
....Gtd 1st Lien Sr Secured Term Loan B due
2020, Ba3 (LGD3)
....Outlook, Stable
..Issuer: Media General Financing Sub, Inc (assumed
by LIN Television Corporation)
....Global Notes due 2022, B3 (LGD5)
..Issuer: Shield Media LLC
....Sr Secured Term Loan A due 2018,
Ba3 (LGD3)
RATINGS RATIONALE
Nexstar plans to raise over $4 billion of debt and will use net
proceeds to fund the cash portion of its acquisition of Media General
as well as refinance existing Media General debt and pay transaction expenses.
Although this transaction will materially increase Nexstar's leverage
at closing, Moody's affirmed the company's B1 corporate family
rating, and the outlook is stable. At closing expected by
year end 2016, Moody's estimates Nexstar's debt-2
yr avg EBITDA will be high at 5.9x (including Moody's standard
adjustments) which weakly positions the company in the B1 rating.
Debt ratings are forward looking as we expect debt-2 yr avg EBITDA
to improve to less than 5.5x within 12 months of closing and annual
free cash flow over odd-even years to exceed $450 million,
or 9% of debt balances, allowing for continued improvement
in credit metrics to better position the company within the B1 rating.
Typical of television broadcasters, ratings are pressured by the
company's vulnerability to cyclical advertising downturns and increasing
media fragmentation. "Looking forward, debt ratings will
be supported by the company's significantly increased scale with national
reach, including entry into 15 of the 50 largest US markets,
and with good diversification across the Big 4 networks. The transaction
elevates Nexstar among the top four local broadcasters (including Sinclair
Broadcast Group, Inc., TEGNA Inc., Tribune
Media Company), each with annual television revenue in excess of
$1.5 billion," stated Moody's Carl Salas. Nexstar
will reach roughly 39% of US households, up from 18%
today. The company will also be in a good position to expand its
digital operations and will have an enhanced footprint in Florida,
North Carolina, Ohio, and Virginia, political battleground
states. We believe the scale of the combined Nexstar and Media
General broadcast footprint provides operating efficiencies and better
positions the company to compete in an increasingly fragmented environment
for advertising and delivery of video content. The company will
also be better positioned to negotiate competitive retransmission fees
with its cable, satellite and telco distributors to offset expected
increases in reverse compensation paid to networks. Post acquisition,
we expect Nexstar to generate annual EBITDA of more than $850 million
(2-yr avg) with high single-digit percentage free-cash
flow-to-debt.
"Nexstar has successfully executed its acquisition growth strategy since
2011 while performing in line with its initial revenue and EBITDA targets,"added
Salas. Despite potential challenges related to assimilating Media
General stations which will more than double the company's revenue
base, Moody's believes management will be successful in realizing
most of the $76 million in planned synergies in the first year
given Nexstar's success with prior acquisitions and given two-thirds
of expected benefits comes from readily achievable elimination of redundant
costs and an uplift in retransmission fees. We expect the company
will maintain good liquidity leading up to the closing of the acquisition
expected by the end of 2016 given significant cash inflows from political
ad demand particularly in the second half of 2016.
The stable rating outlook reflects Moody's view that organic growth in
core ad sales will be in the flat to low single digit percentage range
over the next 12 months with total revenue increasing by 15% or
more on a same station basis in FY2016 due to significant political advertising
largely in the second half of the year as well as growing retransmission
fees. Despite the absence of significant political ad demand in
2017 and restructuring costs related to achieving targeted synergies,
we expect leverage and coverage ratios will improve within the first 12
months of transaction closing consistent with management's commitment
to apply most of its free cash flow to reduce debt balances. Moody's
could consider an upgrade of ratings if operating performance tracks
management's plan, including realization of most of its anticipated
synergies, resulting in debt prepayment and sustained debt-to-2
yr avg EBITDA below 4.50x with minimum 2-yr avg free cash
flow-to-debt in the high single digit percentage range.
Liquidity would also need to remain good with comfortable EBITDA cushion
to financial covenants, and Moody's would need to be assured that
management would maintain operating and financial policies that would
be consistent with the higher rating. Nexstar's debt ratings
could be downgraded if revenue or EBITDA deteriorate due to economic weakness
or underperformance in key markets, or if debt financed transactions
including digital acquisitions, leads Moody's to believe that debt-to-2
yr avg EBITDA will be sustained above 5.50x (including Moody's
standard adjustments) or 2-yr avg free cash flow-to-debt
will remain below 5%.
The principal methodology used in these ratings was Global Broadcast and
Advertising Related Industries published in May 2012. Please see
the Ratings Methodologies page on www.moodys.com for a copy
of this methodology.
Headquartered in Irving, TX, Nexstar Broadcasting, Inc.
will be one of the largest U.S. television broadcasters
and is expected to own, operate, or provide sales and services
to 171 television stations across 100 markets covering 39% of U.S.
television households pro forma for the Media General acquisition and
planned divestitures. Nexstar is publicly traded and, upon
closing of the acquisition, existing Nexstar shareholders will own
roughly 66% of the combined company with Media General shareholders
owning the remaining 34%. Shares of Nexstar are widely held
and current large owners include Neuberger Berman (roughly 9.4%),
MSD Partners (8.9%), Vanguard Group (6.6%),
and Fidelity Investments (6.4%). Annual revenue pro
forma for the transaction exceeds $2.5 billion with more
than 80% of revenue generated from Big 4 network affiliates.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides certain regulatory disclosures in relation
to the credit rating action on the support provider and in relation to
each particular credit rating action for securities that derive their
credit ratings from the support provider's credit rating.
For provisional ratings, this announcement provides certain regulatory
disclosures in relation to the provisional rating assigned, and
in relation to a definitive rating that may be assigned subsequent to
the final issuance of the debt, in each case where the transaction
structure and terms have not changed prior to the assignment of the definitive
rating in a manner that would have affected the rating. For further
information please see the ratings tab on the issuer/entity page for the
respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Carl Salas
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
John Diaz
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's affirms Nexstar's B1 corporate family rating, assigns Ba3 to proposed credit facilities; outlook stable
