Television and newspaper company Tribune has a dual purpose for a proposed $3.8B loan and smaller revolver – it wants to finance a buy and a refi. Moody’s Investors Service sees much to like in Tribune’s moves and no basis for an overall status change.
$2.7B of the loan would go to the acquisition of Local TV, and the remaining $1.1B would be used to refinance existing debt. The assocated revolver would be worth $300M.
Moody’s held the company’s corporate family rating steady at Ba3, and also held its outlook rating steady at stable.
Tribune’s debt-to-EBITDA of 4.4x is called moderately high, and pro forma will actually decrease to 3.9x after Local TV is folded in.
Moody’s Carl Salas explained the immediate benefit of reeling the Local TV stations into the Tribune television group He said, “Tribune will benefit from the shift in revenues and cash flow to growing broadcast/digital assets and the addition of #1 or #2 ranked Big Four affiliates of Local TV. The transaction adds scale and injects favorable network diversification to Tribune’s current concentration of CW affiliates, which are typically ranked #5 in their markets, and enhances relationships with television distributors, networks, and programming suppliers.”
Moody’s notes that Tribune is headed for about $900M in combined television-newspaper cash flow and a television group including 39 O&Os and three more SSA partners.
The analyst is watching for a newspaper spin-off, and is expecting essentially flat newspaper results in the interim. It sees potential in improved results from WPIX-TV in New York, the upcoming political year and improved retransmission consent fees.
A newspaper spin-off would actually increase leverage due to loss of cash flow combined with a lesser decrease in debt, pushing leverage to about 5.0x. The company’s rating will be subject to downgrade if leverage levels exceed that benchmark for a sustained period of time.
