Moody's Reviews Sinclair for Upgrade

Debt refinance deal help “eliminate investor worries”
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NEW YORK: Moody’s Investor Service placed Sinclair on review for a potential upgrade after the broadcaster commenced a debt refinance and a new agreement with an operational partner. The review will supersede one that Moody’s started in July to possibly downgrade Sinclair (NASDAQ: SBGI). Moody’s has Sinclair at Caa2, “about eight notches into junk territory,” according to The Associated Press.

Sinclair announced an arrangement last week to pay off $438 million due over the next two years with new debt due in 2018 and 2027. The company also entered into a Memo of Understanding with Cunningham Broadcasting. Cunningham is Sinclair’s local marketing agreement partner in several markets, generating around $77 million a year for SBGI. Cunningham defaulted on a loan this summer, spurring a bankruptcy warning from Sinclair. SBGI will pay $33.5 million of Cunningham’s debt over the next three years, contingent on completion of the refinancing.

“SBGI announced that it will tender its converts for $980/$1,000 principal and intends to amend its LMA agreement with Cunningham to help its ’sister’ company avoid bankruptcy. These actions should eliminate investor worries over SBGI’s ability to continue as a going-concern,” said Wells Fargo’s Marci Ryvicker in an investors note.

Shares of SBGI made some headway on the news, rising from around $3.50 last Thursday to $3.71 in today’s trading.

More on Sinclair:
October 8, 2009: “Sinclair Commences Tender Offer”
Sinclair also announced that it has entered into a Memorandum of Understanding with Cunningham Broadcasting Corp., contingent upon the refinancing of the notes. SBGI makes around $77 million a year from local marketing agreements with Cunningham, which defaulted on a loan over the summer.

July 15, 2009: “Analyst Deems Sinclair Bankruptcy ‘Remote’
“To be blunt, we think management is posturing. We believe that management is painting the most dire scenario in a public forum as part of its negotiations with convert holders. There are still 10 months before these converts can be put to the company.”

July 14, 2009: “Sinclair Positions for Bankruptcy”
Sinclair Broadcasting group may have to file for bankruptcy if it can’t renegotiate the terms of some of its debt. In a filing with the Securities and Exchange Commission dated July 10, the company said it had $488.5 million due over the next 18 months.

June 19, 2009Standard & Poor’s Cuts Sinclair
“We believe that sluggish TV advertising in a nonelection, recession year will cause Sinclair’s EBITDA to decline further and leverage to continue to rise,” wrote Deborah Kinzer, an S&P credit analyst. “The negative rating outlook reflects our concerns about the company’s deteriorating credit metrics and its ability to refinance potential upcoming puts.”