Moody's affirms HIT Entertainment

Moody's Investors Service said it affirmed HIT Entertainment, Inc.'s corporate family and probability-of-default ratings at B1, senior secured first-lien bank credit facility at Ba3 (LGD3, 36%) and senior secured second-lien loan at B3 (LGD5, 88%).

The outlook is stable.

The agency said the affirmation follows the company's proposed $70 million add-on to its first-lien term, the proceeds of which will be used to fund a number of small acquisitions and refinance outstandings under the revolving credit facility. The company also requested credit agreement amendments that would eliminate maintenance covenants for its first-lien term loan, permitting the company greater flexibility to pursue additional investments and acquisitions.

In Moody's view, HIT's strategy of incremental investments in relatively small and related businesses should enhance the company's value over the long term, although such a strategy increases management execution risk over the short to medium term and the absence of financial maintenance covenants limits constraints.

HIT's B1 corporate family rating continues to reflect its high leverage, sizable annual programming expenses and competitive operating environment, offset by attractive assets with strong brand value and good growth opportunities, the agency said.

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