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Rating Action:

Moody's downgrades Mood Media to Caa1, outlook now negative

Global Credit Research - 24 Mar 2016

Approximately $600 million of rated debt instruments affected

Toronto, March 24, 2016 -- Moody's Investors Service (Moody's) downgraded Mood Media Corporation's (Mood Media) corporate family rating (CFR) to Caa1 from B3, its' Probability of Default rating (PDR) to Caa2-PD from B3-PD, its' secured bank credit facility to B1 from Ba3, and also downgraded the company's senior unsecured notes to Caa2 from Caa1. The company's speculative grade liquidity was affirmed at SGL-3 (adequate) and the rating outlook was revised to negative from stable.

The rating action was prompted by Moody's expectation that ongoing weak operating performance would persist, and that leverage of debt to EBITDA would remain above 7x for the foreseeable future, potentially frustrating future refinance efforts. The company's $250 million of senior secured bank credit facilities come due in 2019, about three years from now, while its $350 million senior unsecured notes come due in 2020. Absent debt reduction or significant EBITDA expansion, neither of which Moody's anticipates, Mood Media's capital structure will become unsustainable. This circumstance may also prompt Mood Media to, effectively, restructure its debts without filing for creditor protection, through open market negotiations to repurchase its debts at less than par (which Moody's may consider as a limited default depending on the terms of the exchange or buyback).

The following summarizes today's rating actions and Mood Media's ratings:

Actions for Mood Media Corporation

.Corporate Family Rating: Downgraded to Caa1 from B3

.Probability of Default Rating: Downgraded to Caa2-PD from B3-PD

.Senior Secured Credit Facility: Downgraded to B1 (LGD1) from Ba3 (LGD2)

.Senior Unsecured Regular Bond/Debenture, Downgraded to Caa2 (LGD4) from Caa1 (LGD4)

.Speculative Grade Liquidity Rating, Affirmed at SGL-3

.Outlook: Changed to Negative from Stable

RATINGS RATIONALE

Mood Media's Caa1 CFR stems from Moody's opinion that, with Debt/EBITDA of nearly 7.5x and with only modest growth prospects and limited free cash flow with which to de-lever, the company's capital structure may not be viable, a matter that will come to a head as 2019 and 2020 debt maturities approach. In the interim, the company has reasonable liquidity, with about $10 million per year of free cash flow, a $15 million revolving credit facility that is only partially drawn, and no debts coming due until 2019. While these matters manage downside risks, the real issue is the uncertainty of whether the company's growth trajectory can improve enough to facilitate much-needed de-levering.

The company's Caa2-PD probability of default rating signals heightened potential of the company, effectively, restructuring its debts without filing for creditor protection, through open market negotiations to repurchase its debts at less than par.

Mood Media has adequate liquidity arrangements (SGL-3) based primarily on free cash flow of about $10 million over the next four quarters, and $7 million of availability under its $15 million revolving credit facility along with adequate covenant compliance cushions.

Rating Outlook

The negative outlook reflects the potential of additional adverse rating actions as Mood Media's debt maturities advance. Since Moody's believes that Mood Media's capital structure may unsustainable, its debts may not be refinance-able.

What Could Change the Rating - Up

• Cash flow self-sustainability together with

• Positive industry fundamentals

• Maintenance of solid liquidity

• Reduced leverage and clarity on capital structure planning

What Could Change the Rating - Down

• Should the company not refinance its debts well in advance of their maturity

• If Moody's expect an imminent default including a distressed debt exchange or buy-back (which Moody's may consider as a limited default depending on the terms of the exchange or buyback)

• Or should liquidity deteriorate

Company Profile

Headquartered in Austin, Texas, Mood Media Corporation provides subscription branding and advertising services using primarily in-store/premises digital audio and visual media for retail companies in the United States (62% of revenue) and internationally (38% of revenue).

The principal methodology used in these ratings was Global Broadcast and Advertising Related Industries published in May 2012. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Moody's has not provided advisory services but may have provided Ancillary or Other Permissible Service(s) to the rated entity, its related third parties and/or the party that requested the rating within the past two years (including during the most recently ended fiscal year). Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's credit rating agency in Canada" on the ratings disclosure page www.moodys.com/disclosures on our website for further information.

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.

Bill Wolfe
Senior Vice President
Corporate Finance Group
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635

Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
(416) 214-1635

Releasing Office:
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
(416) 214-1635

Moody's downgrades Mood Media to Caa1, outlook now negative
No Related Data.
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