(The following statement was released by the rating agency) Overview
-- U.S. TV broadcaster Nexstar is acquiring 12 stations from Newport Television Holdings, and has secured commitments for a new $645 million senior secured credit facility.
-- We are placing our 'B' issue level rating on the company's senior secured second-lien notes on CreditWatch with developing implications, because we could revise our issue-level rating once new debt financing is in place. Developing implications means the rating could be raised, lowered, or affirmed.
-- The stable rating outlook is based on our expectation that Nexstar will maintain a lease-adjusted debt to trailing-eight-quarter EBITDA ratio of 7x or less over the intermediate term, along with adequate liquidity and adequate headroom with covenants. Rating Action On July 25, 2012, Standard & Poor's Rating Services placed its 'B' issue-level rating on the $325 million senior secured second-lien notes due 2017 issued by Nexstar Broadcasting Inc. and Mission Broadcasting Inc. on CreditWatch with developing implications. All other ratings, including the 'B' corporate credit rating, are unchanged. The outlook is stable. We expect to withdraw the 'BB-' issue-level rating on the existing senior secured credit facility and the 'CCC+' issue-level rating on the senior subordinated notes when they are repaid. Rationale The rating action reflects Nexstar's plans to issue new debt to refinance its existing senior secured credit facility (consisting of a $148 million term loan B and a $75 million revolver with $6.7 million drawn as of March 31, 2012), repay its senior subordinated notes (approximately $116 million), and fund the acquisition of 12 stations from Newport Television Holdings. We expect the new capital structure could lead us to revise our recovery rating on the senior secured second lien notes. If the new capital structure consists of first-lien debt equal to 3.5x EBITDA or more, the issue-level rating on the second-lien notes could be lowered to a 'B-' from a 'B'. However, if the new capital structure consists of first-lien debt equal to 2x EBITDA or less and the amount of second-lien debt stays the same, we could raise our issue-level rating on the second-lien notes 'B+' from 'B'. Our rating on Nexstar reflects the company's position as a midsize TV broadcaster focused on smaller markets (which generate smaller pools of ad spending), the structural issues that local TV broadcasting faces as a mature business, and the vulnerability of Nexstar's ad revenue stream to economic downturns and the election cycle. These factors underpin our assessment of the company's business risk profile as "weak." Outlook The stable outlook is based on our expectation that Nexstar will maintain a lease-adjusted debt to trailing-eight-quarter EBITDA ratio of 7x or less over the intermediate term, along with "adequate" liquidity, including at least 15% headroom with covenants. We could raise the corporate credit rating if the company achieves revenue and cost synergies and reduces leverage below 6.5x on a sustained basis. Although somewhat less likely, we could lower the rating if leverage rises to--and remains above--7x on a sustained basis. This could be the result of further debt-financed acquisitions or operating performance below our expectations. Related Criteria And Research
-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
-- Business Risk/Financial Risk Matrix Expanded, May 27, 2009
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008 Ratings List Nexstar Broadcasting Inc. Nexstar Broadcasting Group Inc. Corporate credit rating B/Stable/-- Ratings Affirmed; CreditWatch/Outlook Action Senior Secured Local Currency B/Watch Dev B Recovery Rating 4 4 Mission Broadcasting Senior Secured Local Currency B/Watch Dev B Recovery Rating 4 4 Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings referenced herein can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. (New York Ratings Team)