Moody’s Investors Services has assigned a “B2” rating to Gray Television’s proposed $525 million of new notes due 2024.
At the same time, it upgraded Gray’s existing 5.875% notes due 2026 to “B2.”
Moody’s says the 2026 notes, originally issued in June, are proposed to increase by $200 million.
Gray Television on Sept. 7 priced its previously announced offering of $525 million in aggregate principal amount of 5.125% senior notes due 2024, and $200 million in aggregate principal amount of additional 5.875% senior notes due 2026.
The 2024 Notes were priced at 100% of par. The Additional 2026 Notes were priced at 103% of par plus accrued interest from and including June 14, resulting in an effective yield of 5.398%.
The Additional 2026 Notes are part of the same issuance of, and will rank equally and form a single series with, the $500 million aggregate principal amount of Gray’s 5.875% senior notes due 2026 that were issued on June 14.
Gray’s existing, and certain future, subsidiaries will guarantee the notes on a senior unsecured basis. The sale of the notes is expected to be completed on Sept. 14, subject to customary closing conditions.
Gray will use the proceeds from the offering and cash on hand to complete a tender offer for its outstanding $675 million aggregate principal amount 7½% Senior Notes due 2020.
Any remaining proceeds will be used to redeem any 2020 Notes that remain outstanding after the completion of the Tender Offer.
“We expect the transaction to favorably extend the company’s maturity profile but add approximately $50 million of incremental debt, raising leverage but only slightly,” Moody’s notes, adding that the “B3” rating on Gray’s $675 million notes was upgraded to “B2” consistent with the rating action and subsequently withdrawn at deal close.
All other ratings for Gray are unchanged, and Moody’s outlook on the television station owner remains stable.
“The upgrade to the notes reflects the shift in Gray’s capital structure, which includes more unsecured debt than initially expected,” Moody’s says. “Previously, we assumed there would be more secured bank debt in the capital structure. With less ‘higher priority’ debt in Gray’s capital structure, the company’s unsecured debt is subject to a more favorable recovery rate.”