S&P Raises Outlook on Nexstar Broadcasting (NXST) to Positive; Ratings Affirmed

Standard & Poor's Ratings Services said today that it revised its rating outlook on Irving, Texas-based TV broadcaster Nexstar Broadcasting Group Inc. (Nasdaq: NXST) to positive from stable. At the same time, we affirmed our 'B+' corporate credit rating on the company.

We also assigned our 'B+' issue-level rating and '4' recovery rating to the company's proposed $250 million senior unsecured notes due 2022. The '4' recovery rating indicates our expectation for average recovery (30%-50%; low end of the range) for lenders in the event of a payment default.

In addition, we revised our recovery rating on the company's $525 million senior unsecured notes due 2020 to '4' from '5' and subsequently raised the issue-level rating on the notes to 'B+' from 'B'.

The 'BB' issue-level and '1' recovery ratings on the company's senior secured debt remains unchanged.

"The positive rating outlook reflects Nexstar's increased size and scale as a result of its recent acquisitions and pro forma adjusted debt-to-average-eight-quarter EBITDA in the mid-5x area," said Standard & Poor's credit analyst Jawad Hussain. "The outlook revision also reflects our expectation that leverage will moderate to about 5x over the next 12-18 months."

We expect that Nexstar's leverage, based on average trailing-eight-quarter EBITDA, will gradually moderate and improve to about 5x as the company slows down its debt-financed acquisitions and its margins improve with successful integration of the acquired assets over the next 12-18 months. The outlook also reflects our expectation that Nexstar will maintain adequate liquidity and headroom with its tightest covenant.

We could raise the rating if the company reduces its average trailing-eight-quarter adjusted debt to EBITDA to about 5x on a sustained basis. We would expect this to happen if low-single-digit core ad revenue growth continues, if the company sees strong growth in digital media revenue and retransmission fees, and if it maintains EBITDA margins in the mid-30% area.

We could revise the outlook to stable if the company pursues a financial policy under which average trailing-eight-quarter adjusted leverage remains above 5.5x on a sustained basis due to weaker-than-expected operating performance, large debt financed acquisitions, or a more aggressive shareholder return program.

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