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I AGREE
22 Feb 2011
Approximately $1 billion of rated debt affected
New York, February 22, 2011 -- Moody's Investors Service assigned Baa3, LGD2, 12%
ratings to Sinclair Television Group, Inc.'s ("STG")
new credit facilities consisting of a new $100 million Term Loan
A and a new $240 million Term Loan B. Moody's also
affirmed the Ba3 Corporate Family Rating (CFR) and Ba3 Probability-of-Default
Rating (PDR), for its parent, Sinclair Broadcast Group,
Inc. ("Sinclair" or the company). Ratings for all other
debt instruments remain unchanged; however, Loss-Given-Default
point estimates were updated for the new debt mix. The SGL-2
Speculative Grade Liquidity Rating and the stable outlook remain unchanged.
RATINGS RATIONALE
The proposed new credit facilities include lower pricing and extended
maturities compared to the existing Term Loan B facility (L+4.0%)
due 2015. Net proceeds from the new Term Loan A due 2016 (indicative
L+2.25%) and the new Term Loan B due 2016 (indicative
L+3.25%) will be used to refinance the existing Term
Loan B facility ($270 million outstanding) and call the remaining
$70 million of 6% convertible debentures due 2012 issued
by the parent company. Proposed limitations on restricted payments,
permitted additional indebtedness, acquisitions and investments
are being relaxed to allow a greater percentage of excess cash to be used
to pay dividends and fund potential acquisitions. The extension
of debt maturities following the assumed successful completion of the
refinancing, at more favorable pricing, in conjunction with
Moody's expectations that the company will be comfortably in compliance
with unchanged leverage covenants (7.25x total debt-to-EBITDA
and 3.25x first lien debt-to-EBITDA, each decreasing
thereafter) and interest coverage covenants (1.15x -1.35x)
continue to support the ratings.
The following is a summary of today's actions and Moody's ratings for
Sinclair:
Issuer: Sinclair Broadcast Group, Inc.
Unchanged:
....Corporate Family Rating, Unchanged
at Ba3
....Probability of Default Rating, Unchanged
at Ba3
.Speculative Grade Liquidity Rating, Unchanged at
SGL-2
....4.875% Convertible Senior
Subordinated Notes, Unchanged at B2 (LGD6, 96% revised
from LGD6, 95%)
Issuer: Sinclair Television Group, Inc.
Assignments:
....New Senior Secured Term Loan A (due March
2016), Assigned Baa3, LGD2, 12%
....New Senior Secured Term Loan B (due October
2016), Assigned Baa3, LGD2, 12%
Unchanged:
....Senior Secured Revolver (due June 2011),
Unchanged at Baa3, LGD2, 12% (from LGD1, 9%)
....Senior Secured Revolver (due December
2013), Unchanged at Baa3, LGD2, 12% (from LGD1,
9%)
....Senior Secured Second Lien Notes (due
2017), Unchanged at Ba3, LGD4, 53% (from LGD3,
47%)
.... Senior Unsecured Notes (due 2018),
Unchanged at B2, LGD6, 91% (from LGD5, 87%)
To be Withdrawn:
....Senior Secured Term Loan B (due October
2015), Baa3, LGD1, 9% (to be Withdrawn following
successful completion of refinancing and ensuing pay down)
Sinclair recently announced an offering for a new $100 million
term loan A due March 2016 and a new $240 million term loan B due
October 2016. Net proceeds will be used to refinance all of the
existing $270 million term loan B due 2015 and to fund the take
out of the remaining $70 million of the parent company's
6% convertible debentures due 2012 (unrated).
The affirmed Ba3 CFR reflects the refinancing of near term maturities
and incorporates Sinclair's improved financial profile driven primarily
by a recovery in ad revenues for its core television properties as reflected
in the company's better than expected financial results in the 4th
quarter of 2010 and Moody's stable industry outlook for 2011 and
2012. The ratings accommodate the potential for greater outflows
of excess cash as contemplated by the increased baskets for restricted
payments and other investments. We note that despite Moody's projected
decrease in revenues and EBITDA for 2011, due largely to the absence
of record levels of political ad spending in 2010, we expect debt-to-EBITDA
ratios will remain within existing financial covenants. Providing
further stability, Sinclair recently renewed its affiliation agreement
with Fox and entered into a multi-year carriage deal with Time
Warner Cable, providing a 12-24 month window before significant
agreements will need to be negotiated. In the event of an extended
NFL lockout for the 2011-2012 season, we believe the net
impact would not be significant.
The stable outlook reflects Moody's expectations that total debt-to-EBITDA
will remain below 5.0x (including Moody's standard adjustments)
and that funded debt balances will remain below $1.25 billion,
absent debt financed acquisitions. The Ba3 CFR reflects still high
financial risk, nonetheless, and the inherent cyclicality
of the broadcast television business, among other factors.
Somewhat mitigating these risks are the company's TV station portfolio,
which includes 38 stations that benefit from favorable duopoly structures
and 4 stations that benefit from joint service arrangements, a diverse
offering of network affiliations, and a national footprint covering
35 markets.
We would consider a downgrade if debt-to-EBITDA ratios were
sustained above 5.75x (incorporating Moody's standard adjustments)
as a result of deteriorating operating performance due to weak advertising
demand or as a result of acquisitions, distributions or liquidity
becoming strained due to deteriorating covenant cushion or reduced revolver
availability in the absence of adequate cash balances. We would
consider a potential upgrade of the CFR if Sinclair's debt-to-EBITDA
ratio were sustained comfortably below 4.25x with free cash flow-to-debt
ratios in the high single digit range and good liquidity.
The last rating action occurred on September 20, 2010 when Moody's
upgraded Sinclair's CFR to Ba3 from B1, its PDR to Ba3 from B1,
as well as other debt instruments of Sinclair Broadcast Group, Inc.
and Sinclair Television Group, Inc.
The principal methodologies used in this rating were Global Broadcast
Industry published in June 2008, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Sinclair, headquartered in Baltimore, Maryland, is a
television broadcaster, operating 58 television stations in 35 markets
primarily through STG and its local marketing agreements with 10 stations.
Sinclair generated revenue of approximately $767 million for the
trailing twelve months ended December 2010.
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, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
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
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Carl Salas
Vice President - Senior 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 Baa3 rating to Sinclair's New Credit Facilities; Affirms Ba3 CFR
No Related Data.
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