Deal for TV stations casts shadow on Tribune's credit rating

Tribune Co. went a full six months with unblemished credit. But its plan to buy 19 television stations is casting a shadow over the media conglomerate’s credit rating.

Standard & Poor’s Corp. said Tuesday that Tribune’s $2.7-billion deal for Local TV Holdings has “negative implications” for its credit.

That’s not a credit downgrade. But it signals an increased risk that Tribune’s BB- rating could be cut.

S&P cited the “meaningful increase in leverage” that Tribune is taking on to fund the Local TV purchase. Tribune will use some of its roughly $550 million in cash. It also will draw heavily on a $4.1 billion credit facility.

Tribune was shorn of most of its debt when it emerged from a four-year stint in bankruptcy late last year. Total debt hit $13 billion following the company’s ill-fated buyout by real-estate magnate Sam Zell in 2007. The debt overhang played a big role in pushing Tribune into bankruptcy protection.

On the bright side, S&P praised the logic of buying the TV stations, saying it will reduce Tribune’s reliance on the precarious newspaper industry and “improve the company's business position because of the healthier long-term prospects for broadcasting.”

S&P to raised its overall assessment of Tribune’s business prospects to “satisfactory” from “fair.”


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