Moody's drops Montecito outlook to negative

Moody's Investors Service said it changed Montecito Broadcast Group, LLC's outlook to negative and affirmed the company's corporate family and probability-of-default ratings at B2, secured first-lien revolving credit facility and term loan at B1 (LGD3, 34%) and secured second-lien term loan at Caa1 (LGD5).

The loss-given-default rate of the second-lien term loan was changed to 87% from 86%.

The agency said the negative outlook reflects Montecito's lower-than-anticipated operating and financial performance and Moody's concerns regarding the lack of adequate room under the financial covenants in the company's credit facilities.

The ratings reflect the company's substantial debt-to-EBITDA ratio of around 6x for the year ended Dec. 31, its modest scale, its lack of geographic diversification, the operating challenges Montecito has encountered in the first eleven months of operations and the increasing business risk associated with the broadcast television industry as advertising spending gets diversified over a growing number of media, the agency said.

Montecito's ratings are supported by its substantial margin improvement, diverse network affiliations and concentration of local advertising revenues, Moody's said.

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