Approximately $948 million of rated debt affected
New York, December 11, 2012 -- Moody's Investors Service assigned a Ba2 rating to LIN Television Corporation's
("LIN") proposed $75 million 1st lien secured revolver.
The new revolver is being extended one year to October 2017 and pricing
on the existing term loan B is being reduced. Proposed terms under
the credit agreement include relaxing financial covenant levels and eliminating
step downs. Moody's affirmed LIN's B2 Corporate Family Rating (CFR)
and Probability of Default Rating (PDR), as well as the SGL-2
Speculative Grade Liquidity (SGL) Rating. The rating outlook remains
stable.
Assigned:
..Issuer: LIN Television Corporation
NEW $75 million 1st Lien Sr Secured Revolver:
Assigned Ba2, LGD2 -- 18%
Affirmed:
..Issuer: LIN Television Corporation
.Corporate Family Rating: Affirmed B2
.Probability of Default Rating: Affirmed B2
1st lien sr secured term loan A due 2017 ($124.5
million outstanding): Affirmed Ba2, LGD2 -- 18%
1st lien sr secured term loan B ($258.1
million outstanding): Affirmed Ba2, LGD2 -- 18%
$200 million of 8.375% sr notes due
2018: Affirmed B3, LGD5 -- 75%
$290 million of 6.375% sr notes due
2021: Affirmed B3, LGD5 -- 75%
Speculative Grade Liquidity Rating: Affirmed SGL
-- 2
Outlook Actions:
..Issuer: LIN Television Corporation
......Outlook is Stable
To be withdrawn upon closing of the transaction:
..Issuer: LIN Television Corporation
EXISTING 1st lien sr secured revolver due 2016,
Ba2, LGD2 -- 18%: To be withdrawn
RATINGS RATIONALE
LIN's B2 Corporate Family Rating (CFR) reflects high leverage with a 2-year
average debt-to-EBITDA ratio of 5.1x (including Moody's
standard adjustments) estimated for December 31, 2012 reflecting
improvement compared to 5.5x as of June 30, 2012 pro forma
for the acquisition of New Vision Television. Strong demand for
political advertising in the second half of 2012 resulted in an EBITDA
boost and improved leverage to levels that were reported prior to the
acquisition of New Vision Television. We expect LIN will utilize
the majority of its free cash flow to reduce debt balances, leading
to improved capacity to fund an acquisition or dissolution of the NBC
JV within leverage parameters consistent with its B2 CFR. Moody's
expects 2-year average leverage ratios to fall below 5.0x
by the end of 2013, absent additional acquisitions. EBITDA
should decline in the high single-digit percentage range in 2013,
on a same store basis, due to the absence of significant political
ad spending (more than $65 million in 2012), partially offset
by low single-digit growth in core ad revenues and expected increases
in retransmission fees. The company's leading market positions
and good free cash flow generated by its geographically diverse portfolio
of middle market television stations partially offset the negative impact
of potential delays in achieving the portion of planned revenue synergies
related to the New Vision acquisition and the overhang from LIN TV Corp.'s
guarantee of the NBC JV debt. LIN has multiple network affiliates
in 18 of its 23 markets leading to high revenue share and good margins.
The proposed amendment reduces pricing on the term loan saving $1.9
million of cash interest in 2013. The amendment also provides a
greater EBITDA cushion to financial maintenance covenants by relaxing
the total leverage test to 7.0x from 6.0x, relaxing
the senior leverage test to 3.75x from 3.0x, and eliminating
leverage requirement step-downs. Moody's notes proposed
terms provide management with greater flexibility to refinance at least
a portion of the $815.5 million NBC JV note.
Ratings incorporate expectations that LIN will achieve the majority of
its planned $25 million of revenue and expense synergies related
to the New Vision acquisition by the end of 2014 and that retransmission
revenues through the end of 2013 will increase for existing and newly
acquired stations accompanied by higher expenses related to retransmission
sharing fees (or reverse compensation) paid to the networks. Exposure
to cyclical advertising revenue and the ongoing risk of audience diffusion
resulting from media fragmentation weigh on debt ratings. Liquidity
is good with minimum 2-year average free cash flow-to-debt
ratios of 7% over the rating horizon and the absence of near term
maturities. Ratings also reflect weaker than expected performance
for the NBC JV with lower than initially anticipated retransmission revenues
for 2013 and 2014, reduced ad revenue expectations primarily for
the Dallas station, and the decision to fund construction of a new
studio in Fort Worth. Although stronger EBITDA generation from
LIN's stations in the second half of 2012 and lower debt balances
offset weaker anticipated performance for the NBC JV in 2013, failure
to keep the NBC JV on track with its revised operating plan would erode
the asset coverage provided by the NBC JV stations putting additional
downward pressure on LIN's debt ratings.
The NBC JV continues to be a significant overhang that poses elevated
risk to LIN's credit profile given the recent increase in the expected
shortfalls in meeting interest payments on its $815.5 million
loan from General Electric Capital Corporation ("GECC") through 2014 and
given the decline in its asset value since the JV was formed in 1998.
As of December 2011, the NBC JV was valued at $118 million
less than amount due under the note; although significant,
this value gap reflects improvement compared to the estimated $254
million gap between asset value and the note amount at FYE2010 and $366
million at FYE2009. Moody's believes the NBC JV has a greater
reliance on the financial capacity of LIN due to increased potential that
the value of the NBC JV will be less than the amounts owed related to
the $815.5 million note at maturity in addition to any unpaid
shortfall loans (currently not guaranteed by LIN). In January 2011,
Comcast acquired 51% of NBCUniversal, Inc. with GE
owning the remaining 49%. Additionally, LIN TV Corp.
and GE agreed to fund interest coverage shortfalls with loans based on
LIN's ownership interests (LIN 20% / GE 80%). Ratings
hinge on our expectation that LIN will utilize free cash flow to reduce
debt and leverage to increase its capacity to finance an acquisition or
other dissolution of the NBC JV, particularly if it occurs prior
to the 2023 GECC loan maturity. Under most scenarios, an
acquisition or dissolution of the NBC JV would be leveraging to LIN.
The company's capacity to fund a transaction without exceeding leverage
metrics expected in the B2 CFR (as would be the case if a transaction
occurred in the near term) increases the longer it can forestall such
an event. Moody's believes LIN could fund a transaction within
the B2 rating by the end of 2014 or 2015 assuming free cash flow continues
to be applied to reduce debt balances and assuming no additional downward
revisions to the operating plan of the NBC JV.
The stable rating outlook reflects our expectation that LIN will track
Moody's base case forecast with core revenues growing in the low single
digit percentage range resulting in 2-year average debt-to-EBITDA
ratios (includes political and non-political years) remaining below
5.75x over the rating horizon and good liquidity including continued
capacity to fund an additional $6 million of estimated debt service
shortfalls of the NBC JV through 2014. The outlook does not include
significant increases in debt balances to fund additional acquisitions
resulting in elevated debt-to-EBITDA ratios. Ratings
could be downgraded if an advertising downturn, cash distributions
to shareholders, additional debt financed acquisitions, or
the dissolution of the NBC JV results in 2-year average debt-to-EBITDA
ratios being sustained above 6.0x (including Moody's standard adjustments)
over the next 12 to 18 months. Beyond 12 to 18 months, debt-to-EBITDA
ratios would need to be reduced sufficiently below FYE2012 levels to maintain
a B2 CFR and to position the company for a refinancing of debt maturing
in 2017-2018 while providing financial flexibility to resolve NBC
JV obligations. Deterioration in liquidity including diminished
capacity to cover debt service shortfalls at the NBC JV (that increases
near term risk of dissolution of the JV) or other cash requirements could
also result in a downgrade. An upgrade is not likely until there
is a clear path to resolution of the overhang related to the NBC JV.
RECENT EVENTS
On November 15, 2012, the company launched LIN Mobile to provide
mobile marketing solutions for clients nationwide. Management continues
to add to its digital platform having acquired Nami Media in 2011 and
RIMM in 2009. On November 14, 2012, the company extended
its $25 million stock repurchase program to November 2013 from
November 2012. A total of roughly $15 million has been repurchased
since November 2011 leaving $10 million available under the program.
The principal methodology used in rating was the Broadcast and Advertising
Related Industry Methodology published in May 2012. Other methodologies
used include Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
LIN Television Corporation is headquartered in Providence, RI,
and owns or operates 43 television stations plus 7 digital channels in
23 mid-sized U.S. markets ranked #22 to #188
reaching 10.6% of U.S. television households.
In addition, LIN TV Corp., the company's parent,
owns 20% of KXAS-TV in Dallas, TX and KNSD-TV
in San Diego, CA, through a joint venture with NBCUniversal
Media, LLC ("NBC JV"). HM Capital Partners LLC ("HMC") holds
an approximate 42% economic interest in LIN and approximately 70%
of voting control is held by HMC and Mr. Royal Carson III,
a LIN director and advisor for HMC. The company is expected to
generate approximately $550 million of net revenues for the fiscal
year ended December 2012 (includes acquisition of New Vision from October
12, 2012)
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant 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.
Information sources used to prepare the 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 considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Carl Salas
Vice President - Senior Analyst
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 assigns Ba2 to LIN's proposed 1st lien sr secured revolver; affirms B2 CFR
