Moody's cuts Young Broadcasting

Moody's Investors Service downgraded Young Broadcasting Inc. including cutting its $86.1 million 9% senior subordinated notes due 2006, $137.7 million 8.75% senior subordinated notes due

2007 and $344.3 million 10% senior subordinated notes due 2011 to Caa1 from B3 and confirmed its $156.9 million 8.5% senior unsecured notes due 2008 at B2. The outlook is now stable.

Moody's said the downgrades broadly reflect weak operating performance by Young's KRON television station; the expectation that it will take at least 36 months for cash flow to recover; and the resultant material diminution in perceived underlying asset value ascribed to the San Francisco station as a means of lending support to the former ratings.

The confirmations reflect a changing mix of capital over recent periods and as expected, specifically inclusive of Moody's expectation that bank debt will remain largely absent from or immaterial to the company's capitalization, and that subordinated debt will be the financing security of choice if needed over the forward period.

Young purchased KRON for $737 million, including $650 million in cash, in 2000 for approximately a 12.0 times multiple. The station, which was previously operated as an NBC affiliate, began broadcasting as an independent in January 2002. As an independent, KRON has been cash absorptive rather than providing the previously meaningful cash contribution implied by the acquisition multiple, Moody's said.

Further, Moody's said it expects KRON to produce only modest cash flow this year and believes the execution risk related to the independent strategy continues to be high as the San Francisco market, while recovering, remains highly competitive. Given the sharply diminished cash flow at KRON, particularly relative to the company's former projections and Moody's own expectations, and the company's financially strained balance sheet, it is unlikely that the company could garner top dollar for the station as a result of a sale. As KRON represents a significant proportion of the value of the station portfolio, Moody's believes that the asset coverage provided to subordinated noteholders is now below that of Young's peer group and provides a smaller cushion above current debt levels than previously existed.

The high business risk at Young is exacerbated by the high financial risk associated with the company's balance sheet, Moody's said. Leverage is high with total debt/EBITDA of 11.6 times, and cash flow coverage is insufficient with (EBITDA-capex)/interest of approximately 0.7 times as of March 31,

2003.

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