S&P Global Ratings downgraded E.W. Scripps Co.'s corporate credit rating to BB- from BB, and Moody's placed the company's ratings, including the Ba2 corporate family rating, on review for downgrade, following Scripps' agreement to acquire the Katz Broadcasting networks.
E.W. Scripps plans to finance the deal with $250 million of new debt and about $50 million of cash on hand. S&P lowered its issue-level rating on the company's revolving credit facility to BB+ from BBB-, while the issue-level rating on the company's senior unsecured notes was downgraded to BB- from BB.
S&P "expects leverage to rise meaningfully, with forecasted pro forma adjusted debt to average-eight-quarter EBITDA in the high-3x area as of year-end 2017 and in the mid-3x area in 2018." S&P Global's outlook on E.W. Scripps is stable.
Moody's expects pro forma leverage to be about 4.8x when the deal is completed. The agency believes the acquired assets are relatively weaker than E.W. Scripps' broadcast assets with lower margins.
E.W. Scripps agreed to acquire Katz broadcast networks in a deal worth $302 million, E.W. Scripps already owned 5% in a portion of the business, so the net purchase price of the deal is $292 million. The deal is expected to close Oct. 2, subject to Hart-Scott-Rodino clearance and customary closing conditions.
S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global Inc.