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Rating Action:

Moody's assigns B2 rating to LBI Media's proposed notes; Caa1 CFR affirmed on assumed refinancing

07 Mar 2011

Approximately $469 million of rated debt affected

New York, March 07, 2011 -- Moody's Investors Service assigned a B2 rating to LBI Media, Inc's ("LBI" or the "Company") proposed senior secured note offering. Concurrently, Moody's also affirmed LBI's Caa1 Corporate Family Rating ("CFR") and the Caa2 rating on its $229 million of 8.5% senior subordinated notes. LBI plans to issue up to $240 million of new senior secured notes to refinance outstanding indebtedness under its existing bank credit facilities and potentially repay its $42 million of 11% senior discount notes (unrated). The B1 ratings for LBI's existing revolving and term loan facilities will be withdrawn upon full repayment of the facilities at the close of the transaction. The outlook for the ratings is stable.

Moody's has taken the following rating actions:

Proposed $240 million Senior Secured Notes due 2019 -- Assigned B2 (LGD3, 31%)

Corporate Family Rating -- Affirmed at Caa1

Probability of Default Rating -- Affirmed at Caa1

$228.8 million of 8.5% senior subordinated notes due July 2017 -- Affirmed at Caa2 (LGD5, 81%)

$150 million Revolving Credit Facility due March 2012 -- Unchanged at B1 (LGD2, 21%), to be subsequently withdrawn

$114.5 million Term Loan Facility due June 2012 -- Unchanged at B1 (LGD2, 21%), to be subsequently withdrawn

Ratings are subject to the execution of the proposed transaction and Moody's review of final documentation.

RATINGS RATIONALE

Affirmation of LBI's Caa1 corporate family rating reflects Moody's view that despite the rebound in financial results in 2010 coupled with expectations for solid revenue and EBITDA growth in 2011, as principally driven by expanded coverage for its Estrella TV network, LBI's credit profile remains constrained by the Company's very high debt leverage and weak interest coverage (the latter made worse by higher associated debt service costs under the proposed refinancing).

The Caa1 primarily reflects LBI's high financial risk stemming from its highly levered capital structure (pro forma Moody's adjusted debt-to-EBITDA of approximately 11.7x), thin interest coverage (EBITDA less Capex to interest expense of under 1.0x), and negative free cash flows. Additionally, the rating is also constrained by the Company's modest size relative to much larger and better capitalized peers and the vulnerability of its financial results to cyclical advertising spending. The ratings are supported, however, by LBI's solid rating performance and audience share within its core Spanish-language radio and TV markets, and expanded coverage for its Estrella TV network, which combined with continued favorable growth trends in the U.S. Hispanic population and advertising spend targeting this demographic will likely drive revenue and cash flow growth and ultimately enhance the value of LBI.

The stable rating outlook incorporates Moody's view that despite our expectation that LBI will benefit from improved macro conditions and an ongoing rebound in advertising spending, as well as continued market penetration of its Estrella TV network into new and existing affiliate markets over the next 12-18 month period, financial leverage will likely remain very high (above 10.0x) and free cash flow growth prospects will remain challenged due to increased interest expense under the proposed refinancing.

Moody's notes that to the extent that LBI is unable to successfully complete the proposed transaction and refinance its bank credit facilities maturing March 2012 on reasonably economically attractive terms, the Company's liquidity profile would arguably be construed as "very weak" and this would likely lead to a negative outlook and/or potentially negative rating revisions. Moreover, downward rating pressure could develop if LBI's liquidity position in general deteriorates and/or its credit metrics begin to weaken from current levels.

Moody's could consider a positive outlook and/or rating action to the extent LBI is able to demonstrate through a combination of revenue and EBITDA growth and permanent debt reduction such that leverage is sustained comfortably below 8x debt-to-EBITDA (Moody's adjusted) and is trending towards 7x or lower, interest coverage (EBITDA -- Capex to Interest) improves to the 1.5x-range, and free cash flow turns positive and grows to a range approximating 5% of Moody's adjusted debt.

The last rating action occurred on August 10, 2010 when Moody's affirmed LBI's Caa1 CFR and changed the rating outlook to stable from negative.

The principal methodology used in this rating was Moody's Global Broadcast Industry, published in June 2008.

Headquartered in Burbank, California, LBI Media, Inc operates Spanish-language radio and TV stations including 21 radio stations, nine TV stations, and the Estrella TV Network, a Spanish-language television broadcast network in the U.S. Its annual revenues for 2010 were approximately $116 million.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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New York
Kyle Chen
Analyst
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Russell Solomon
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns B2 rating to LBI Media's proposed notes; Caa1 CFR affirmed on assumed refinancing
No Related Data.
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