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Announcement:

Moody's says agreements by Media General and LIN Media to amend merger terms and divest stations in five markets have no immediate impact on credit ratings of either company

09 Sep 2014

New York, September 09, 2014 -- Moody's says Media General, Inc. ("Media General") and LIN Media LLC ("LIN") announced an amendment to their March 2014 merger agreement following the loss of the CBS affiliation at LIN's Indianapolis station (WISH) when the affiliate agreement expires at the end of 2014. LIN shareholders will receive reduced consideration from the merger of either $25.97 in cash (previously $27.82 in cash) or 1.4714 shares of the new holding company (previously 1.5762 shares), subject to proration, which reflects a $110 million reduction in merger consideration. Assuming the maximum amount of cash is required, amended terms will result in a reduction in the equity portion of the merger consideration but no change in the expected debt portion given estimated cash payments will be unchanged at $763 million, excluding transaction fees and expenses. Media General's former shareholders will own roughly 67% (previously 64%) and LIN's former shareholders will own the remaining 33% (previously 36%) of the new holding company. With the exception of LIN's $290 million 6.375% senior notes due 2021, Moody's expects all of LIN's debt instruments to be refinanced upon completion of the merger.

In addition, Media General and LIN also announced agreements with Hearst Corporation ("Hearst"), Meredith Corporation ("Meredith"), and Sinclair Broadcast Group ("Sinclair") to acquire certain stations being divested by Media General/LIN in five overlap markets to address regulatory concerns related to the pending merger. Media General will also acquire two stations in Colorado Springs and one station in Tampa from Sinclair. Management expects the transactions to result in an estimated $16 million net reduction of 2013/2014 average broadcast cash flow, but generate $140 million - $160 million in net proceeds available to reduce debt balances. In aggregate, the loss of the CBS affiliation in Indianapolis and likely reduction in cash flow, the amended merger agreement, as well as proposed divestitures and acquisitions will have no immediate impact on the credit ratings of Media General or LIN as credit metrics are expected to change only modestly given $140 million - $160 million of debt repayment. Post merger and announced transactions, Media General's 2-year average debt-to-EBITDA is expected to be in the mid 5x range (including Moody's standard adjustments) estimated for FYE2014 with at least mid-single digit percentage 2-year average free cash flow-to-debt despite Moody's expectations for higher reverse compensation paid to networks as affiliate agreements are renewed. The announced divestitures and acquisitions are contingent upon shareholder approvals, regulatory consents, and completion of the merger (expected in early 2015).

Moody's issuer comment, "Agreements by Media General and LIN Media to amend merger terms and divest stations in five markets have no immediate impact on credit ratings" can be found on moody's.com

Media General, headquartered in Richmond, VA, is a leading television broadcaster and is expected to own, operate or service 71 network affiliated stations and associated digital properties across 48 markets covering 24% of U.S. television households, post-closing of the pending merger with LIN and announced transactions. Network affiliations will include 22 CBS stations, 14 NBC, 12 ABC, 8 FOX, 7 CW, and 7 MNT. The company is publicly traded and, as part of the LIN merger, Media General plans to form a new holding company through which existing Media General shareholders will own 67% of the new holding company with LIN shareholders owning the remaining 33%. Current owners of Media General include Standard General, Oppenheimer, Gabelli, and Highland Capital, with the remainder being widely held. Average 2012 and 2013 revenue pro forma for announced transactions is $1.2 billion.

Headquartered in Austin, TX, LIN Media LLC, the parent of LIN Television Corporation, currently owns, operates or services 43 network affiliated television stations plus seven digital channels in 23 mid-sized U.S. markets ranked #22 to #189 reaching 10.5% of U.S. television households. The company's digital media division operates from 31 markets across the country, including New York City, Los Angeles, San Francisco, Chicago, and Atlanta and contributes 15% of total net revenue. LIN is publicly traded with HM Capital Partners LLC ("HMC") holding an approximate 38% economic interest and with HMC and Mr. Royal Carson III, a LIN director and advisor for HMC, controlling roughly 70% of the vote. The company entered into an agreement to combine with Media General, Inc. ("Media General") in a transaction that values LIN at approximately $2.5 billion. The company reported $702 million of net revenues for 12 months ended June 30, 2014.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Carl Salas
VP - Senior Credit Officer
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 C 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 says agreements by Media General and LIN Media to amend merger terms and divest stations in five markets have no immediate impact on credit ratings of either company
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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