Moody's trims Spanish Broadcasting

Moody's Investors Service said it downgraded Spanish Broadcasting System, Inc.'s corporate family rating and senior secured note rating to Caa1 from B3. The agency also trimmed the probability of default rating to Caa1-PD from B3-PD and revised the outlook to negative from stable.

“The downgrade of the rating and negative outlook reflect the increase in pro forma leverage to approximately 9.5x (LTM Q1 2023 excluding Moody's standard adjustments) as well as Moody's expectations that leverage is likely to remain at elevated levels in 2023 and 2024. The debt maturity structure is concentrated on the senior secured note due in March 2026 which elevates refinancing risk.

“While Spanish Broadcasting's national and digital revenue will continue to benefit from advertising interest in reaching the company's core customer base, local advertising revenue will be pressured by high inflation and slow economic growth as well as negative secular pressures in the radio industry. Expenses have also increased as Spanish Broadcasting has made additional investments in content, digital infrastructure, and two new stations in Orlando and Tampa, Fla.,” the agency explained in a press release.

Moody’s said these investments will continue contributing to growth, but they not be enough to offset the effect of cyclical and secular pressures on operating performance.

Additionally, the agency noted the pending sale of Spanish Broadcasting's television assets, including real estate, for $64 million in cash will buoy liquidity and provide added funds for investment, acquisitions or debt repayment.

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