Nineteen Broadcast Groups On Moody’s 'Bottom Rung' List

Analyst predicts decline for ’09
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Moody’s analyst Karen Berckmann said she sees no improvement in conditions for broadcast station groups on the credit rating’s list of firms most likely to default on their debt.

Moody’s released its quarterly, “Bottom Rung,” list early this week. Companies receiving a debt rating a Caa1 and below are expected to have trouble repaying debt within the next twelve months. Nineteen broadcast owners appear on the list of 283 companies that fall into that category. Among them are: Univision Communications, ION Media Networks, Newport Television Holdings, Spanish Broadcasting System and the Oakhill Capital Partners’ which acquired a group of Fox owned stations under the subsidiary name, FoxCo Acquisition Sub.

“We’ve had a negative outlook on the sector for some time. It’s a very fixed cost business, so when revenue goes down you can only do so much on the cost side,” said Berckmann who added that a number of station groups have told her they hope to gain from troubles in the newspaper sector where a number of big name titles have been drastically downscaling their operations or even threatening closure. Station groups in turn are targeting newspaper advertisers hard and even poaching ad sales staff from their print rivals.

Moody’s looks carefully at geographical location of station groups in weighing their financial health as well as whether they are number one or two in their market. The analyst said auto advertising comprises some 20%-25% of revenue and that problems in that ad category have largely contributed to station group difficulties. Moody’s is now releasing its “bottom rung,” list on a monthly basis.

When companies default on their debt they can decide to go into bankruptcy before missing their payments, others renegotiate the debt at higher interest rates and some put the For Sale sign out.

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