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Rating Action:

Moody's assigns Ba3 to Nexstar first lien credit facility

19 Jun 2013

New York, June 19, 2013 -- Moody's Investors Service assigned a Ba3 rating to the proposed first lien credit facility of Nexstar Broadcasting, Inc. (Nexstar). The company plans to use proceeds primarily to fund the acquisition of Communications Corporation of America and White Knight Broadcasting (CCA).

Moody's also affirmed Nexstar's B2 corporate family rating and adjusted other instrument ratings and LGD point estimates as shown.

Nexstar Broadcasting, Inc.

....Corporate Family Rating, Affirmed B2

....Probability of Default Rating, Affirmed B2-PD

....Speculative Grade Liquidity Rating, Affirmed SGL-2

....8.875% Second Lien Bonds, Affirmed B3, LGD adjusted to LGD5, 71% from LGD4, 65%

....6.875% Senior Unsecured Bonds, Affirmed Caa1, LGD6, 91%

....Senior Secured First Lien Term Loans, Assigned Ba3, LGD2, 24%

....Senior Secured First Lien Credit Facility, Downgraded to Ba3, LGD2, 24% from Ba2, LGD2, 19%

....Outlook, Remains Positive

Rocky Creek Communications, Inc

....Senior Secured First Lien Term Loan, Assigned Ba3, LGD2, 24%

....Outlook, Positive

RATINGS RATIONALE

Moody's estimates that the debt-funded transaction will increase Nexstar's leverage to approximately 5.5 times debt-to-EBITDA on a two year average basis from approximately 5 times as of the twelve months ended March 31 (two year average, pro forma for recent acquisitions and related financing). Incorporating expected synergies would reduce two year average leverage to about 5.2 times debt-to-EBITDA, and Moody's expects the company to achieve these synergies within the first year of the acquisition.

The incremental debt will likely delay debt reduction and slow the trajectory to lower leverage. However, Moody's continues to believe the company could achieve sustained two year average leverage below 4.75 times debt-to-EBITDA, the trigger laid out for an upgrade, by the end of 2014, supporting the positive outlook. Furthermore, the acquisition expands the company's scale and enhances geographic diversification, with the addition of nineteen television stations and seven associated digital sub-channels in ten markets, seven of which are new markets. The combination also creates two new duopolies and adds five duopolies, supporting continued strong EBITDA margins.

Moody's assigned a Ba3 to the proposed first lien term loans of Nexstar and Rocky Creek Communications, Inc. (Rocky Creek), a newly created borrowing entity holding the licenses for two of the acquired stations. The Rocky Creek term loan will have guarantees from Nexstar, but Rocky Creek will not guarantee the Nexstar loans. However, given the modest size of the Rocky Creek term loan (less than $20 million) and the modest amount of cash flow the two stations generate relative to overall Nexstar cash flow, Moody's ranks the Nexstar debt and the Rocky Creek debt pari passu in our waterfall of liabilities. Moody's also lowered the rating on Nexstar's existing first lien credit facility to Ba3 from Ba2 due to the increase in first lien debt, which now comprises a larger portion of the overall liability structure.

Nexstar's B2 corporate family rating incorporates its high, albeit improved, leverage, which poses challenges for managing a business vulnerable to advertising spending cycles. However, we anticipate synergies related to the proposed acquisitions, continued expansion of retransmission and e-Media related cash flow (even after rising payments to the networks) and modest growth in core advertising revenue, together with some debt repayment, will facilitate an improvement in the credit profile. Geographic and network diversity diminishes vulnerability to regional economic downturns and to the success of content of any particular network, but the company remains susceptible to economic conditions and faces continued competition for advertising dollars related to media fragmentation. Good liquidity also supports the rating, particularly important given the need to integrate acquisitions, though we consider synergies achievable at modest cost and with low operational risk.

The positive outlook reflects the potential for an upgrade to B1 based on continued improvement in the credit profile from the combination of ongoing core EBITDA growth on a two-year average basis, debt reduction and accretive acquisitions.

Moody's would consider an upgrade based on expectations for sustained two-year leverage below 4.75 times debt-to-EBITDA, sustained positive free cash flow-to-debt in the high single-digit percent range, and continued modest growth in core advertising revenue and expansion of the e-Media business. An upgrade would also require maintenance of good liquidity.

The outlook could revert to stable based on expectations for sustained two-year leverage remaining above 5 times debt-to-EBITDA, whether due to weak ad demand, operational challenges or debt funded dividends or acquisitions. Moody's would consider a downgrade based on expectations for sustained two-year average debt-to-EBITDA above 6 times and free cash flow-to-debt below 3%. Deterioration of the liquidity profile could also trigger a downgrade.

The principal methodology used in this rating was the Global Broadcast and Advertising Related Industries 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.

Based in Irving, Texas, Nexstar owns, operates, programs or provides sales and other services to 72 television stations in 41 markets. The expected acquisition of CCA stations will expand its operation to 91 television stations in 48 markets with estimated two year average revenue of about $600 million.

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 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 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 rating action, and whose ratings may change as a result of this 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.

Karen Berckmann
Asst Vice President - 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 Ba3 to Nexstar first lien credit facility
No Related Data.
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