Sinclair says Cunningham's maturity extension creates room to work with bondholders

By Jennifer Lanning Drey

Portland, Ore., Aug. 5 - Sinclair Broadcast Group, Inc. chief financial officer David Amy said Cunningham Broadcasting Corp.'s recently announced term loan maturity extension has provided Sinclair with additional "breathing room" to work with holders of its 3% convertible senior notes and 4.875% convertible senior notes to address the potential put of the bonds in May 2010 and January 2011.

Speaking during Sinclair's second-quarter earnings conference call held Wednesday, Amy said that Sinclair, along with its restructuring advisors, have begun discussions with an ad hoc committee of the 3% and 4 7/8% bondholders regarding restructuring exchange alternatives.

Sinclair reiterated that a resolution with bondholders must consider the company's ability to service its debt going forward and provide for the refinancing of future maturities.

Amy declined to provide any additional comments on the nature of the discussions during the call.

Sinclair operates six television stations for Cunningham as part of a local management agreement. Under the arrangement, an acceleration of the Cunningham debt would cause a cross default under Sinclair's secured credit facility.

The Cunningham facility was originally scheduled to mature on July 31, but the date has been extended to Oct. 30. Cunningham has $33.5 million outstanding under the facility.

Balance sheet items

Sinclair ended the second quarter with net debt of $1.30 billion at June 30 versus net debt of $1.32 billion at March 31.

The outstanding debt included $104.5 million drawn on its revolving credit facility, leaving availability of about $64 million under the $168.6 million commitment, Lucy Rutishauser, Sinclair's vice president of finance and treasurer, said during the call.

Cash and cash equivalents were $13.08 million at the end of the period.

Leverage at the operating company was 3.31 times at June 30, compared to a covenant requirement of 6.5 times, Rutishauser reported.

Sinclair generated $27.1 million of free cash flow in the second quarter, which was $12.2 million less than in the prior-year second quarter due to lower EBITDA, which was partially offset by savings in interest expense, capital expenditures and taxes.

Broadcast net revenues down

Sinclair posted second-quarter broadcast revenues from continuing operations of $133 million, down almost 19% from the comparable prior-year period. Operating income was $25.8 million in the second quarter, versus operating income of $43.3 million in the same period of 2008.

The company does not expect advertising-based businesses to begin to recover until the second half of 2010.

Sinclair is a Hunt Valley, Md.-based television broadcaster.

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