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Rating Action:

Moody's assigns Baa3 rating to Sinclair's New Credit Facilities; Affirms Ba3 CFR

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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