S&P revises DLG outlook to negative

Standard & Poor's said it revised its outlook on the parent of All3 Media Group, DLG Acquisitions Ltd., to negative from stable, and affirmed its B+ long-term corporate credit rating.

In addition, the agency affirmed its B+ issue ratings on the group's £282 million first-lien term debt due 2021. The recovery rating on all the first-lien tranches is 3, indicating an expectation of meaningful recovery prospects (in the lower half of the 50%-70% range) in the event of a payment default.

Finally, S&P affirmed its B- issue rating on DLG's €100 million second-lien term loan maturing in 2022. The recovery rating is 6, indicating an expectation of negligible (0%-10%) recovery in the event of a payment default.

S&P said the outlook revision reflects its view of the rising risks to DLG's credit quality, stemming from the marked increase in growth spending in 2015 to date affecting its profitability margins and cash generation. The agency anticipates an improvement from 2016 onward as the acquisitions' contribution to earnings grows, and investment in scripted shows and start-ups bears return.

If the company is unable to restore its adjusted EBITDA to interest of at least 2 times and start generating FOCF by the end of 2016, S&P believes that credit quality will have declined and we could consider a downgrade.

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