S&P rates Emmis notes, loan

Standard & Poor's said it assigned its B+ rating and a recovery rating of 2 to Emmis Operating Co.'s proposed $1 billion secured credit facility and assigned its B- rating to the company's proposed $350 million subordinated notes.

The ratings on parent company Emmis Communications Corp., including its B+ long-term corporate credit rating, are affirmed.

The outlook is stable.

The proposed transaction significantly reduces interest expense, which is expected to boost Emmis' discretionary cash flow and its EBITDA to interest coverage ratio. Borrowings under the proposed credit facilities and proceeds from the proposed subordinated notes are expected to be used to refinance the company's existing credit agreement, 8.125% subordinated notes, and 12.5% discount notes.

S&P said the ratings on Emmis continue to reflect high financial risk from debt-financed acquisitions, a competitive radio and television advertising environment, somewhat less station portfolio diversity than many of its peers, and the presence of much larger operators in key markets.

These factors are only partially offset by the competitive positions of the company's large-market radio operations, good discretionary cash flow generating capability of the broadcasting business, a track record of boosting performance at acquired radio and television stations, and strong station asset values, particularly in large markets.

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