S&P downgrades LBI

Standard & Poor's said it lowered the corporate credit rating on LBI Media Inc. to B- from B, reflecting weak advertising demand and thinning liquidity following the onset of cash interest payments on its 11% discount notes in April.

The outlook is negative.

The agency downgraded LBI's secured debt to B- from B+ and revised the recovery rating to 3 from 2 and its $225 million 8½% senior subordinated notes to CCC with 6 recovery rating.

"We expect weak radio and TV ad demand will continue to pressure LBI's revenue in 2009, especially in the company's California markets where the recession has affected LBI's infomercial business," S&P analyst Michael Altberg said in a statement.

Ratings reflect weak credit metrics due to LBI's highly leveraged capital structure, negative discretionary cash flow, cash flow concentration in a small number of large U.S. Hispanic markets, intense competition for audiences and advertisers from much larger rivals and financial risk associated with its debt-financed acquisition strategy, the agency said.

The company's niche position as an operator of Spanish-language radio and TV stations, its healthy EBITDA margin relative to peers and broadly favorable Spanish-language advertising trends, are modestly positive factors, S&P said.

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