TEXT-S&P may raise Nexstar Broadcasting

(The following statement was released by the rating agency)


-- On July 19, 2012, U.S. broadcaster Nexstar entered into an agreement to purchase 12 TV stations owned by Newport Television Holdings for $285 million, concluding the company's strategic review process.

-- We are placing our 'B' rating on the company on CreditWatch with positive implications. We are also placing all issue-level ratings on CreditWatch with positive implications.

-- The CreditWatch listing reflects our current reassessment of the company's future business and financial risk profile, weighing its expanded station holdings and its pending refinancing.

Rating Action On Oct. 5, 2012, Standard & Poor's Ratings Services placed its 'B' rating on Texas-based TV broadcaster Nexstar Broadcasting Group Inc.


CreditWatch with positive implications. We also placed all issue-level ratings on CreditWatch with positive implications.

We expect to withdraw the issue-level ratings on the existing senior secured credit facility and the senior subordinated notes when they are ultimately repaid through a refinancing.


The CreditWatch placement is based on our view that the stations to be acquired from Newport Television will improve Nexstar's station portfolio. The Newport stations include two top 50 markets and will increase network and geographic diversification. We expect that the company will also be able to generate cost synergies as some of the acquired stations are in the same market or state as current Nexstar stations. The transaction is expected to close later this year or early next year.

Our rating on Nexstar reflects the company's position as a midsize TV broadcaster focused on smaller markets (which generate smaller pools of ad spending), the structural issues that local TV broadcasting faces as a mature business, and the vulnerability of Nexstar's ad revenue stream to economic downturns and the election cycle.

Nexstar's second-quarter 2012 results were in line with our expectations. Revenue and EBITDA grew by 18% and 35%, respectively, year over year, driven largely by strong growth in political ad revenue and retransmission fees. Core ad revenue grew by 6.7%, 2.2% on an unaffected same-station basis (excluding stations that changed their affiliation), as the largest category--auto advertising--rose 16%. The EBITDA margin for the quarter improved to 39% from 34% as a result of higher retransmission fee revenue. We expect full-year 2012 revenue and EBITDA growth of around 20% and 40%, respectively, not including the results of the Newport stations to be acquired. Lease-adjusted leverage was 5.6x as of June 30, 2012. Pro forma for the station acquisition, leverage was over 6x. Management has stated that the stations are being acquired for an average 2011/2012 broadcast cash flow multiple of approximately 8.3x, excluding synergies.


We expect to resolve the CreditWatch listing once we have completed our discussion and analysis of the expanded station group, and have assessed the new capital structure, covenant terms, and maturity profile. Our preliminarily assumption is minimal incremental leverage through the upcoming refinancing. We will also review management's financial policy regarding leverage and shareholder returns, following its 2011-2012 exploration of strategic alternatives.

Related Criteria And Research

-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012

-- Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

-- Use Of CreditWatch And Outlooks, Sept. 14, 2009

-- Criteria Guidelines For Recovery Ratings, Aug. 10, 2009

-- Standard & Poor's Revises Its Approach To Rating Speculative-Grade Credits, May 13, 2008

-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

-- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008

-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008

Ratings List Ratings Affirmed; CreditWatch Action To From Nexstar Broadcasting Group Inc. Nexstar Finance Holdings LLC Nexstar Finance Holdings Inc. Nexstar Broadcasting Inc. Corporate Credit Rating B/Watch Pos/-- B/Stable/-- Mission Broadcasting Inc.

Senior secured credit facilities BB-/Watch Pos BB-

Recovery Rating* 1

Senior secured second-lien notes B/Watch Pos B/Watch Dev

Recovery Rating* 4 Nexstar Broadcasting Inc.

Senior secured credit facilities BB-/Watch Pos BB-

Recovery Rating* 1 Senior secured second-lien B/Watch Pos B/Watch Dev Recovery Rating 4 Subordinated CCC+/Watch Pos CCC+ Recovery Rating 6 Nexstar Finance LLC Subordinated CCC+/Watch Pos CCC+ Recovery Rating* 6

*Standard & Poor's does not place its recovery ratings on CreditWatch; however, this does not preclude our recovery assessment from potentially

(Caryn Trokie, New York Ratings Unit)

((Caryn.Trokie@thomsonreuters.com; 646-223-6318; Reuters Messaging: rm://caryn.trokie.reuters.com@reuters.net))