Moody's: LBI Media in limited default

Moody's Investors Service said it assigned a limited default (LD) designation to LBI Media, Inc.'s Caa2 probability of default rating and affirmed the resulting Caa2-PD/LD from Caa2-PD.

This action follows LBI Media Holdings, Inc. entry into a forbearance agreement on 80% of its $29 million outstanding notes due April 30, 2017, Moody's said.

The company exchanged the 2017 maturing notes for new senior unsecured securities due April 30, 2022 issued by LBI Media Intermediate Holdings, Inc., a newly formed subsidiary of LBI Media Holdings and the parent of LBI Media, the agency said.

Moody's said it assessed the transaction was a distressed exchange default (DDE) due to the extension of the maturity date beyond its initial terms and change of interest payment terms.

In addition, the remaining 20% of $29 million outstanding notes due April 30, 2017 remain in default due to non-payment at maturity, the agency noted.

There are no cross-default provisions between LBI Media debt and either LBI Media Holdings or LBI Media Intermediate Holdings, S&P said.

Moody's also said it affirmed LBI Media's Caa2 corporate family rating, B3 rating on 10% senior secured notes due 2019 and Caa3 rating on 11½% and 13½% payment-in-kind toggle second-priority subordinated notes due 2020.

The outlook remains negative.

The ratings reflect the company's unsustainable leverage with heightened near-term risk of corporate restructuring, Moody's explained.

Liquidity is poor with only $3.5 million in cash on the balance sheet as of Dec. 31, 2016, the agency said, and negative free cash flow generation over the past 12 months.

If the company files for bankruptcy protection or performs an out-of-court restructuring, the agency said it will downgrade the company's probability of default rating to D-PD.

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