S&P Global Ratings has assigned a series of issue-level ratings and recovery ratings in response to a “liquidity enhancing” deal Sinclair Inc. announced earlier this month. And, the credit watchdog largely believes the publicly traded company is doing the right thing.
As previously reported by RBR+TVBR, the agreement involves a debt recapitalization, designed to strengthen the company’s balance sheet and “better position it for long-term growth.”
This has led S&P Global Ratings to assign its ‘B+’ issue-level rating and ‘1’ recovery rating to Sinclair Inc.’s indirect subsidiary Sinclair Television Group Inc.’s new $1.43 billion senior secured first-out first-lien notes due 2033.
The ‘1’ recovery rating indicates an expectation for very high (rounded estimate of 95%) recovery for lenders in the event of a payment default.
Sinclair plans to use the proceeds from these notes to repay the $1.175 billion balance outstanding on its senior secured term loan B-2 maturing in 2026; purchase notes held by certain parties to the transaction support agreement; and to pay related fees and expenses related to the transactions.
S&P Global Ratings also assigned a ‘B-‘ issue-level rating and ‘3’ recovery rating to Sinclair’s proposed senior secured second-out first-lien term loan B-6 maturing in 2029, term loan B-7 maturing in 2030, and notes due 2032.
The ‘3’ recovery rating indicates an expectation for meaningful (rounded estimate of 55%) recovery for lenders in the event of a payment default.
Sinclair is offering to exchange its term loan B-3 ($714 million outstanding) maturing in 2028 for a new second-out first-lien term loan B-6 maturing in 2029; to exchange its term loan B-4 ($731 million outstanding) maturing in 2029 for a new second-out first-lien term loan B-7 maturing in 2030; and to exchange $246 million of its 4.125% secured notes due 2030 for new 4.375% second-out first-lien notes due 2032.
At the same time, S&P Global Ratings lowered its issue-level rating on the company’s existing revolving credit facility, term loan B-3, term loan B-4, and senior secured notes due 2030 to ‘CCC’ from ‘B’ and removed the ratings from CreditWatch, where S&P Global Ratings placed them with negative implications on Jan. 15, 2025.
The holders of the company’s existing revolving credit facility and term loans that do not participate in the proposed exchanges will have their liens subordinated and become third-lien debtholders while the holders of the company’s existing senior secured notes due 2030 that do not participate in the proposed exchange will have their liens released and become unsecured debtholders. For S&P Global Ratings, “We do not expect there to be any remaining value for the nonparticipating lenders in a hypothetical default scenario.”
Therefore, S&P Global Ratings revised its recovery rating on Sinclair’s existing senior secured debt to ‘6’ from ‘2’.
The ‘6’ recovery rating indicates S&P Global Ratings’ expectation for negligible (0%) recovery for lenders in the event of a payment default.
Additionally, S&P assigned a ‘CCC’ issue-level rating and ‘6’ recovery rating to Sinclair’s proposed $432 million 9.75% senior secured second-lien notes due 2030.
One debtholder is exchanging their senior secured notes due 2030 for this debt.
“Our ‘CCC’ issue-level rating and ‘6’ recovery rating on the company’s existing 5.125% senior unsecured notes due 2027 and 5.5% senior unsecured notes due 2030 are unchanged,” S&P Global Ratings concluded.
STG has entered into a transaction support agreement with lenders representing about 80% of the principal amount outstanding of its senior secured term loans and about 75% of the principal amount outstanding of its senior secured notes due 2030. For the purposes of our recovery analysis, S&P Global Ratings assumes 90% participation in the proposed debt exchanges.
