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TEXT-S&P rates LIN TV senior unsecured notes
2012年10月4日 / 下午4点52分 / 5 年前

TEXT-S&P rates LIN TV senior unsecured notes

Overview
     -- U.S. TV broadcaster LIN TV is acquiring New Vision Television.
     -- The company plans to issue $290 million of senior unsecured notes to 
partially finance this acquisition.
     -- We are assigning the proposed notes our 'B-' issue level rating and 
raising our ratings on the company's 8.375% senior notes to 'B-' as well.
     -- The stable rating outlook reflects our expectation that LIN's 
operating performance will improve in 2012, enabling it to further reduce its 
leverage so that fully adjusted debt (including leases, pensions, and 
off-balance sheet-obligations) to trailing-four-quarter EBITDA could improve 
to below the mid-6x level by the end of the year.
 
Rating Action
On Oct. 4, 2012, Standard & Poor's Ratings Services assigned Providence, 
R.I.-based LIN Television Corp.'s proposed $290 million of senior unsecured 
notes due 2021 its 'B-' issue-level rating and '5' recovery rating, indicating 
our expectation for modest (10% to 30%) recovery in the event of a payment 
default. LIN Television Corp. is a wholly owned subsidiary of parent LIN TV 
Corp. (LIN), a U.S. TV broadcaster. LIN plans to use the net proceeds to 
partly finance its acquisition of New Vision Television. Pro forma for the 
transaction, we expect LIN's debt to last-12-month EBITDA (adjusted for 
leases, pension, and contingent obligations) to rise to about 8.7x from 6.9x 
as of June 30, 2012. However, with the influx of political advertising 
revenues and retransmission fees in 2012, we expect adjusted debt to 
last-12-month EBITDA to decline to below the mid-6x level by year-end. We 
expect the acquisition to close in 2012. 

At the same time, we raised the issue-level rating on LIN Television Corp.'s 
8.375% senior notes due 2018 to 'B-' from 'CCC+' and revised the recovery 
rating to '5' from '6'. The upgrade reflects the higher default-scenario 
valuation of the company resulting from the acquisition. 

Finally, we affirmed the 'B' corporate credit rating on LIN. The outlook 
remains stable.

Rationale
Our rating on LIN also reflects our assessment of the company's business risk 
profile as "fair" and its financial risk profile as "highly leveraged," based 
on our criteria. We view LIN's business risk profile as fair based on its 
portfolio of TV stations in midsize markets, strong position in local news, 
and an EBITDA margin comparable to its peers. Factors in our assessment of 
LIN's financial risk profile as highly leveraged include its high debt 
leverage and large contingent liability stemming from its guarantee of $815 
million joint-venture debt. LIN's fully adjusted leverage of 7x, as of June 
30, 2012, is in line with our financial risk indicative ratios of debt to 
EBITDA of greater than 5x, for a highly leveraged financial risk profile.

LIN is a midsize TV broadcaster. Pro forma for the New Vision Television 
transaction, LIN will operate or service 50 network affiliates in 23 markets, 
reaching 10.6% of U.S.TV households. The 18 New Vision TV stations confer 
greater geographic diversity, particularly in the Western U.S. markets. LIN's 
station affiliations are diversified across the four major U.S broadcast 
networks, shielding it from the risk of individual network underperformance. 
Most of the company's stations are ranked first or second in local news--an 
important competitive edge for building loyal local viewing and attractive 
political advertising. Additionally, its duopoly positions in a number of its 
markets provide cost savings, enhancing cash flow. LIN's EBITDA margin of 
about 30% is only average among its broadcasting peers and significantly lags 
its more efficient competitors, whose EBITDA margins are in the high-30% area. 

Under our base-case scenario for 2012 (which includes the New Vision TV 
stations for about three months), we expect LIN's revenue to grow at over a 
30% percentage rate and EBITDA to rise by over 60%, reflecting sharp increases 
in political ad revenue and retransmission fees from recently renewed carriage 
contracts, despite only low-single-digit percent growth in core ad revenue. We 
also expect moderate EBITDA margin expansion, which is likely to be more 
evident in election years, as the proportion of political advertising in the 
revenue mix is relatively high for LIN compared to its peers, leading to 
moderate revenue and EBITDA variability between election and nonelection years.

In the quarter ended June 30, 2012, revenue and EBITDA grew 20% and 41%, 
respectively, largely reflecting strong growth in political ad revenues and 
retransmission consent fees. Core ad revenue grew 6%, as the largest 
category--auto advertising--was up 25%. For the 12 months ended June 30, 2012, 
the EBITDA margin was 31%, down from 35% for the same period in 2011, as the 
full benefit of high-margin presidential and local political ad revenue will 
be concentrated in the second half of this year.

In 2011, LIN and NBC Universal (NBCU) extended $12.2 million of shortfall 
loans to their joint venture, Station Venture Holdings LLC, so the venture 
could fund its interest payments. LIN contributed $2.5 million, its 20% share 
of debt service shortfalls. The joint-venture shortfall agreement between LIN 
and NBC Universal's 49% owner, General Electric Co., has been extended to 
April 1, 2013, because the joint venture is unlikely to cover its 2012 
interest expense on its own. We view GE as having some incentive to continue 
its support because GE Capital Corp. is the sole lender in the venture's 
$815.5 million debt maturing 2023. Although Comcast Corp., NBCU's 51% owner, 
does not support the venture, the venture's two stations in Dallas and San 
Diego are important NBC affiliates. LIN estimates its share of shortfalls 
loans will be about $4 million during 2012 and into 2013. We believe LIN's 
$815.5 million guarantee of the debt of its joint venture with NBC Universal 
is a significant financial risk for the company; we therefore consolidate a 
portion of the joint-venture debt in determining LIN's credit measures. We add 
$296 million in incremental debt, which is the present value of the guaranteed 
debt ($815.5 million), less an assumption of joint-venture station proceeds 
based on a conservative 6.5x multiple (relating to a hypothetical 
joint-venture distressed scenario) of trailing eight-quarters' joint-venture 
EBITDA. 

As of June 30, 2012, LIN's debt (adjusted for leases, pensions, and contingent 
joint-venture obligations) to trailing-four-quarter EBITDA ratio was high, at 
6.9x (essentially unchanged from 6.8x one year ago). Pro forma for the New 
Vision TV stations acquisition, we expect this metric to be essentially 
unchanged at 7x. Using average trailing-eight-quarter average EBITDA to smooth 
the differences between election and nonelection years, LIN's lease-adjusted 
debt to EBITDA was still highly leveraged, at 7x, but down from 7.7x a year 
ago and will be essentially unchanged pro forma for the acquisition. EBITDA 
coverage of interest was improved, at 3.2x, versus 2.8x a year ago. By the end 
of 2012, Pro forma for the New Vision TV transaction, fully adjusted leverage, 
on a trailing-four-quarter EBITDA basis, could improve to about below 6x level 
(below 7x on a trailing-eight-quarter EBITDA basis). We expect interest 
coverage to fluctuate between 2.5x and 3.5x, as EBITDA varies during the 
election cycle.

For the 12 months ended June 30, 2012, LIN TV's discretionary cash flow 
declined to $52 million, compared with $65 million one year ago. Conversion of 
EBITDA into discretionary cash flow also fell to 37%, from 46% one year ago, 
caused by higher negative working capital and capital expenditures. Despite 
higher capital spending forecasted for 2012, we expect discretionary cash flow 
to more than double in 2012 (to $90 million-$100 million) from 2011 levels 
with the addition of the New Vision stations and the return of political ad 
revenue.

Liquidity
Based on our criteria, LIN's sources of liquidity are "adequate" to cover uses 
over the next 12 to 18 months. Our assessment of its liquidity profile 
incorporates the following factors, expectations, and assumptions:
     -- We expect sources of liquidity over the next 12 to 18 months to exceed 
uses by at least 1.2x.
     -- We expect net sources to be positive, even if EBITDA drops 25%, which 
is normal for a local TV broadcaster in an odd-numbered nonelection year.
     -- Compliance with financial covenants could survive a 20% drop in 
EBITDA, in our view. 
     -- We believe LIN has a somewhat diminished ability to absorb, with 
limited need for refinancing, low-probability, high-impact events over the 
next 12 months. Our view is based on LIN's guarantee of $815.5 million 
joint-venture debt and the venture's dependence on its two key investors for 
liquidity support.
     -- LIN has good relationships with its banks, in our assessment, and a 
good standing in the capital markets.
 
Liquidity sources as of June 30, 2012, included cash balances of $9 million, 
availability of $65 million under its revolving credit facility (which matures 
in October 2016), and our expectation of more than $120 million of funds from 
operations in 2012. These liquidity sources will be more than sufficient to 
fund working capital needs, annual capital expenditures of between $20 million 
and $25 million (per our assumptions), and debt maturities of about $12 
million over the next two years, consisting mainly of scheduled term loan 
amortizations. We expect LIN to generate $90 million to $100 million of 
discretionary cash flow in 2012, mainly when political ad revenue peaks in the 
second half of the year, and remaining at the same level in 2013, when a full 
year of New Vision cash flow compensates for the absence of political 
advertising in 2013.

LIN TV's credit facilities contain total leverage and senior leverage 
covenants and also an interest coverage covenant. It had a 32% EBITDA cushion 
against its 6.0x consolidated leverage covenant, a 28% EBITDA cushion against 
its 3.75x senior leverage covenant, and a 34% EBITDA cushion against its 2.25x 
interest coverage covenant as of June 30, 2012. The senior leverage covenant 
tightens more sharply than the other two tests, from 3.75x to 3.0x by the end 
of 2012 and we expect LIN to face modest covenant compliance pressures, 
particularly in nonelection years. However, it should still be able to 
maintain adequate covenant headroom through the election cycle.

Recovery analysis
For the complete recovery analysis, please see Standard & Poor's recovery 
report on LIN TV, to be published following this report on RatingsDirect.

Outlook
The stable rating outlook reflects our expectation that LIN's operating 
performance will improve in 2012, enabling it to further reduce its leverage 
so that fully adjusted debt (including leases, pensions, and off-balance-sheet 
obligations) to trailing-four-quarter EBITDA could improve to below the mid 6x 
level by the end of the year. We could raise the rating if we believe LIN can 
maintain this leverage metric below 6x (and its lease-adjusted debt to average 
trailing-eight-quarter EBITDA also below 6x) throughout the election cycle and 
if the joint venture can improve its operating performance to the extent that 
it no longer requires shortfall loans. 

Conversely, we could lower our rating if revenue and EBITDA falter because a 
derailing of the economic recovery reverses core ad revenue growth, resulting 
in strained liquidity and narrowing senior leverage covenant headroom; or if 
the operating performance of its joint venture with NBCU continues to 
deteriorate, thereby requiring LIN to substantially increase its support 
through shortfall loans and funding; or if GE decides to no longer provide 
financial support to the joint venture.

Related Criteria And Research
     -- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 
2012
     -- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
     -- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
     -- Standard & Poor's Revises Its Approach To Rating Speculative-Grade 
Credits, May 13, 2008
     -- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
     -- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
     -- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
 
Ratings List

Ratings Affirmed

LIN TV Corp.
 Corporate Credit Rating                B/Stable/--        

LIN Television Corp.
 Senior Secured                         BB-                
   Recovery Rating                      1

New Rating

LIN Television Corp.
 $290M sr unsecd notes due 2021         B-                 
   Recovery Rating                      5                  

Upgraded
                                        To                 From
LIN Television Corp.
 Senior Unsecured                       B-                 CCC+
   Recovery Rating                      5                  6

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