Reuters logo
TEXT-S&P puts Nexstar second-lien ratings on watch developing
July 25, 2012 / 3:43 PM / 5 years ago

TEXT-S&P puts Nexstar second-lien ratings on watch developing

 (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)
 

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below