Sinclair Broadcast warns of possible Ch. 11 filing

Television station owner Sinclair Broadcast Group Inc. has warned it may be forced to file for Chapter 11 bankruptcy protection as it struggles with continued declines in advertising spending and a hefty debt load.

The Baltimore-based company, which owns 58 TV stations in 35 markets, said in a regulatory filing Friday that the recession continues to hurt its advertisers, including those in the automotive industry, which have historically made up a quarter of the company's total ad sales.

The company also has a heavy debt burden. At March 31, it had $1.33 billion of total debt outstanding, and holders of its 3 percent convertible senior notes and 4.875 percent senior subordinated notes may require Sinclair to buy back nearly $500 million worth of that debt within the next 18 months.

In its Securities and Exchange Commission filing, Sinclair said it doesn't have the cash to buy back that debt and could be forced to file for Chapter 11 bankruptcy protection. It is currently negotiating with lenders to restructure the notes.

"In addition, under certain circumstances, creditors may file an involuntary petition for bankruptcy against us," the company said in the 8-K filing. "Due to the possibility of such circumstances occurring, we have begun planning for such potential restructurings."

Sinclair also cited the declining financial health of Cunningham Broadcasting Corp., one of its local marketing agreement partners, which could significantly crimp the company's revenue. And the recent downgrade of Sinclair's credit ratings by agencies Moody's and Standard & Poor's will make it more expensive for the company to borrow any capital needed to meet its debt obligations.

The company plans to update investors Tuesday at 3 p.m. EDT on latest developments.

Sinclair shares fell nearly 21 percent Monday to close at $1.46. The stock is down 81 percent since reaching a 52-week high of $7.84 last summer before the market meltdown.

Like other media outlets, U.S. television broadcasters have suffered major declines in advertising spending. The research firm BIA Advisory Services has forecast that television revenue will drop by about 20 percent this year.

Sinclair has said it doesn't expect advertising sales will start to recover until the second half of 2010.

In May, the company reported a first-quarter loss of more than $85 million, compared with a year-ago profit of $15 million, as revenue slid to $154.7 million from $186.7 million. In February, Sinclair suspended its quarterly dividend of 20 cents and cut more than 200 positions, or about 7 percent of its work force, noting it faces a non-election year devoid of political advertising and a continuing recession.

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