Moody's changes Granite Broadcasting view to negative

Moody's Investors Service said it affirmed the long-term ratings of Granite Broadcasting Corp., including its Caa1 corporate family rating, and changed the outlook to negative.

Other ratings affirmed include the company's B3 rating on the 9.75% senior secured notes due 2010 and the Ca rating on the 12.75% preferred stock due 2009.

The move follows the company's announcement that it has agreed to sell its two WB affiliate stations in San Francisco and Detroit for a total consideration of $180 million, $177.5 million in cash and $2.5 million in equity.

Moody's said it expects the company to either reinvest the proceeds from this transaction in replacement assets over the next 270 days or offer to redeem part of the outstanding 9.75% senior secured notes due 2010, per the terms of its bond indenture.

The negative outlook reflects Moody's belief that the WB affiliate stations garnered a lower value than is consistent with their attractive market positioning, the risk of potential deterioration in value of the remaining assets given management's poor track record in operating the station portfolio, and the resulting reduced cushion between asset value and the company's debt securities. Additionally, the negative outlook incorporates Moody's concerns over management's ability to successfully reinvest in replacement assets that will generate positive cash flow instead of favoring debt reduction.

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