S&P Keeps a 'B-' Rating On NextMedia, But Drops Company From 'Stable' To 'Negative'
March 30, 2012 at 3:57 AM (PT)
STANDARD & POOR'S has released a new corporate credit rating for NEXTMEDIA. Wrote S&P, "We expect tightening covenants will cause U.S. diversified media company NEXTMEDIA's cushion of compliance with covenants and liquidity to erode over the next year. We believe that the company will need to refinance or obtain an amendment in order to maintain compliance with covenants in 2013."
"We are revising our 'B-' rating outlook on the company to negative from stable," continued S&P. "The negative outlook reflects our view of risks associated with narrowing covenant headroom in early 2013."
In explaining the move, S&P noted, "Our assessment of NEXTMEDIA's business risk as 'weak' stems from its exposure to radio advertising (56% of revenues for the 12 months ended DEC. 31st, 2011). The company's radio results have underperformed U.S. industry peers', partly because of its dependence on lagging local advertising, coupled with persistent economic weakness. We believe the radio industry faces secular risks that could impede sustained growth -- most importantly, market share loss to alternative traditional and digital media. In our view, there are moderate longer-term growth prospects at the outdoor segment (34% of 2011 revenues), which is under less structural pressure than certain other local media, such as radio, newspapers, and directories. We believe that radio revenue could grow slightly in 2012. However, beyond 2012, we expect declines in radio revenue to offset much of the growth at the outdoor segment."