S&P Lowers Debt Rating on Belo

Yesterday the agency lowered its credit rating on Belo (the broadcasting company).  As the FrontBurnervian who sent me the news last night remarked, “Things are getting uglier at Communicatons Center.” The full release after the jump, but here is the key paragraph:

“The downgrade reflects our expectation that Belo’s operating performance will remain weak over the intermediate term, which will cause the company’s leverage metrics to stay above a level appropriate for a ‘BB-‘ rating,” said Standard & Poor’s credit analyst Deborah Kinzer. “In addition, we are concerned that the company will need to amend the financial covenants in its credit agreement to avoid a covenant violation as early as the fourth quarter of 2009.”

NEW YORK (Standard & Poor’s) Aug. 27, 2009–Standard & Poor’s Ratings Services today lowered its corporate credit rating on Dallas, Texas-based TV broadcaster Belo Corp. to ‘B+’ from ‘BB-‘. The rating outlook is stable.
    “The downgrade reflects our expectation that Belo’s operating performance will remain weak over the intermediate term, which will cause the company’s leverage metrics to stay above a level appropriate for a ‘BB-‘ rating,” said Standard & Poor’s credit analyst Deborah Kinzer. “In addition, we are concerned that the company will need to amend the financial covenants in its credit agreement to avoid a covenant violation as early as the fourth quarter of 2009.”

    Belo’s declining EBITDA has quickly absorbed the moderate cushion the company obtained from the February 2009 amendment to its credit agreement, despite cutting costs and modestly reducing debt. As of June 30, 2009, the company had a roughly 16% EBITDA cushion of compliance with its leverage covenant. Leverage per lenders was 5.30x, versus a 6.25x covenant at June 30, 2009. Although we foresee that the company will continue to generate modest discretionary cash flow that could be used for debt repayment, we expect that EBITDA will continue to deteriorate from large declines in local and national ad revenue. As of June 30, 2009, Belo had roughly $1.1 billion of debt outstanding.

    The ‘B+’ rating reflects Belo’s high financial leverage from the retention of all outstanding indebtedness after the February 2008 spinoff of its newspaper business, the vulnerability of TV broadcasting’s revenues to economic cycles, earnings volatility between election and nonelection years, and competition from alternative media. The company’s strong station portfolio and diversification among network affiliations minimally offset these factors.

    At the same time, we lowered our issue-level rating on the company’s senior unsecured debt to ‘B’ from ‘B+’. The recovery rating on this debt remains unchanged at ‘5’, indicating our expectation of modest (10% to 30%) recovery for debtholders in the event of a payment default. (See Standard & Poor’s recovery report on Belo, to be published on RatingsDirect immediately following the release of this report.)

Newsletter

Get a weekly recap in your inbox every Sunday of our best stories from the week plus a primer for the days ahead.

Find It

Search our directories for...

Restaurants

Restaurants

Bars

Bars

Events

Events

Attractions

Attractions

View All

View All

Comments

Comments are closed.