S&P Global Ratings cuts Sinclair Broadcast Group, Diamond Sports Holdings

Sinclair Broadcast Group Inc. was hit with a one-notch downgrade from S&P Global Ratings, which cited underperformance at Sinclair subsidiary Diamond Sports Holdings LLC as the reason for the move.

Diamond Sports Holdings, or DSH, represents about half of Sinclair's consolidated revenue. While S&P Global Ratings today delinked the pair's issuer credit ratings, the agency said it continues to consolidate the operations into Sinclair's financial and credit metrics. It went on to cut Sinclair to B+ from BB- on the expectation that the company's consolidated EBITDA will decline by about 25% in 2021 due to DSH's continued underperformance. At the same time, it downgraded DSH and its subsidiary Diamond Sports Group LLC to CCC+, from BB- with a negative outlook, on the possibility of a distressed debt exchange or repurchase.

While S&P Global Ratings expects Sinclair's leverage to remain above its 5.5x downgrade threshold for at least the next few years, the agency adopted a negative outlook that reflects the risk that leverage could remain above 6.5x in 2022 if local advertising fails to pick up and if sporting events continue to be delayed or canceled.