Fitch keeps Hearst-Argyle TV on evolving watch

Fitch Ratings said Hearst-Argyle Television, Inc. (BBB-) remains on Rating Watch evolving following Thursday's statement by the Hearst Corp. that its board of directors authorized the purchase of up to 8 million shares of Hearst-Argyle TV's series A common shares. The purchases would increase Hearst's indirect ownership of the company to a maximum of 82% from the current 74%.

In the agency's opinion, this represents a positive because it reduces the amount that could potentially be debt-financed at the Hearst-Argyle TV level should Hearst eventually purchase 100% of the subsidiary.

However, the Rating Watch evolving status takes into account the uncertainty related to Hearst-Argyle TV's pro forma capital structure should Hearst eventually purchase the remaining 18% equity stake. Fitch estimated that borrowing costs at Hearst would be materially lower than at Hearst-Argyle TV and this could be a major driver for any potential financing plans of Hearst. On the other hand, the agency noted the possibility that potential incremental financing of the 18% stake could occur at Hearst-Argyle TV, which would be a credit negative for the company.

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