Moody's rates Granite's new notes B3

Moody's Investors Service said it assigned a B3 rating to Granite Broadcasting Inc.'s proposed $300 million issuance of senior secured notes due 2010 and withdrew the ratings for the company's 10.375% and 9.375% notes due 2005.

All other ratings were confirmed.

Net proceeds from the new issue will be used to repay the company's $140 million unrated bank credit facility and call about $135 million of its subordinated notes.

Moody's said the ratings reflect the company's weak operating history and the prospect of cash flow levels that are below those necessary to meet its long-term debt service obligations and make capital improvements, as well as the likelihood of material impairment to the preferred stock upon ultimate recovery in a default scenario.

The ratings are mostly supported, however, by Moody's confidence in the value of the company's station portfolio in comparison to the rated securities, and the possibility that Granite's management may transition its portfolio to one with greater profit potential.

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