Moody's affirms Emmis

Moody's Investors Service said it affirmed the Caa2 corporate family rating and Caa3 probability of default rating for Emmis Communications Corp., as well as its SGL-4 speculative grade liquidity rating and senior secured bank credit facility at Caa2 (LGD 6, 98% revised from LGD 6, 97%).

The agency also affirmed Emmis Operating Co.'s senior secured bank credit facility at CC2 (LGD 3, 35% revised from LGD 3, 34%).

Operating performance improved with the economic recovery, but absent debt reduction with proceeds from an asset sale or equity infusion Emmis will likely breach its leverage covenant when the covenant suspension period ends for the quarter ending Nov. 30, 2011, in Moody's opinion.

The ratings incorporate expectations for a covenant breach in November 2011, Moody's said.

The agency said it considered the company's capital structure unsustainable, and its operations in the cyclical advertising business magnify this challenge.

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