Moody's, S&P Cut Sinclair Broadcasting Rtgs Deeper Into Junk

Moody's Investors Service and Standard & Poor's Ratings Services downgraded their credit ratings on on Sinclair Broadcast Group Inc. (SBGI) deeper into junk territory, citing the effects of the possible bankruptcy of one of its partners.

Shares fell 21% to $1.46 in after-hours trading.

Broadcasters have been hurt by the recession, which has caused ad budgets to plunge. Moreover, old-line media are facing a challenge from the rise of the Internet, which is now a major competitor for consumer eyeballs.

Both ratings agencies noted that a bankruptcy filing by Cunningham Broadcasting Corp., which has local market agreements with Sinclair in six television markets, could cause Sinclair to default on its credit facility.

Moody's cut its corporate family rating two notches to Caa2, or highly speculative, while S&P lowered its corporate credit rating two notches to B-, one step above highly speculative. Both firms warned of possible future downgrades.

Sinclair announced last week that Cunningham could enter bankruptcy proceedings by the end of July, when its $33.5 million term loan terminates, which would cause a default and potential acceleration under Sinclair's bank credit facility.

Sinclair is negotiating with Cunningham to amend the terms of its local market agreements or possibly contribute cash to Cunningham. Cunningham is owned by family members of the Smith brothers, Sinclair's majority owners.

Sinclair, which operates 58 television stations in 35 markets, expects to receive about a third of its projected 2009 broadcast cash flow from its relationship with Cunningham.

Moody's and S&P last cut Sinclair's ratings two notches in June.

-By Kathy Shwiff, Dow Jones Newswires; 212-416-2357; Kathy.Shwiff@dowjones.com

Source: http://online.wsj.com/article/BT-CO-20090713-713634.html