Moody's reviews Tribune for possible downgrade

Moody's reviews Tribune for possible credit ratings downgrade on $2.7B purchase of TV stations

Associated Press

NEW YORK (AP) -- Moody's Investors Service on Tuesday put Tribune Co.'s credit rating under review for a possible downgrade following its announcement it would buy Local TV Holdings LLC and its 19 TV stations for $2.73 billion in cash.

The company said it had lined up $4.1 billion in loans, including a $300 million revolving credit line, to fund the acquisition and refinance its existing debt.

Moody's said that although the move would help move Tribune's revenue mix away from the troubled newspaper publishing business, it marked an increase in debt load relative to its cash generating ability.

Moody's corporate family rating on Tribune is "Ba3," or three notches below investment grade.

The credit ratings agency estimated the ratio of Tribune's debt to earnings before interest, taxes, depreciation and amortization was 3-1 at the end of December. The acquisition of Local would increase that ratio, Moody's said. It also noted that the credit terms will allow Tribune to pay out dividends from the sale of publishing and real estate assets or equity investments, instead of paying down debt.

If the deal is completed by the end of the year as planned, Chicago-based Tribune will operate 42 television stations, reaching roughly 44 percent of U.S. households. It had combined revenue of about $3.7 billion in the year through the end of March.

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