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S&P puts Tegna on watch
S&P said it placed all of the ratings on Tegna Inc., including the BB issuer credit rating, on CreditWatch with negative implications.
The negative watch is due to an expectation that leverage will increase higher than the 4.5x downgrade threshold, the agency said.
Tegna has signed a definitive agreement to acquire two TV stations and one radio station from Dispatch Broadcast Group for $535 million, S&P said.
The agency said it expects the acquisition will be mostly debt-funded, causing pro forma leverage to increase to about 4.8x in 2019.
In resolving the CreditWatch placement, the agency said it will evaluate the company's financial policy, liquidity, ability to reduce leverage over the next year and execution risk associated with integrating multiple acquisitions.
The CreditWatch placement follows news that company is acquiring WTHR-TV in Indianapolis, WBNS-TV in Columbus, Ohio and WBNS Radio in Central Ohio in a debt-funded transaction that will increase pro forma leverage to about 4.8x in 2019, S&P said.
The announcement follows Tegna's agreements earlier in 2019 to acquire 11 stations from Nexstar Media Group for $740 million, the agency noted, and pay Cooper Media $77 million for two multi-cast networks.
These debt-funded acquisitions had already increased Tegna's pro forma leverage to the upper end of the previously established 4x to 4.5x range for the BB rating.
While the company is suspending share repurchases through 2020 to reduce leverage, S&P said it believes potential future shareholder returns or additional debt-funded acquisitions may prevent the company from reducing leverage to less than 4.5x on a sustained basis.
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