LIN Television Corporation -- Moody's assigns Ba2 to LIN's proposed 1st lien sr secured revolver; affirms B2 CFR

New York, December 11, 2012 -- Moody's Investors Service assigned a Ba2 rating to LIN Television Corporation's ("LIN") proposed $75 million 1st lien secured revolver. The new revolver is being extended one year to October 2017 and pricing on the existing term loan B is being reduced. Proposed terms under the credit agreement include relaxing financial covenant levels and eliminating step downs. Moody's affirmed LIN's B2 Corporate Family Rating (CFR) and Probability of Default Rating (PDR), as well as the SGL-2 Speculative Grade Liquidity (SGL) Rating. The rating outlook remains stable.

Assigned:

..Issuer: LIN Television Corporation

NEW $75 million 1st Lien Sr Secured Revolver: Assigned Ba2, LGD2 -- 18%

Affirmed:

..Issuer: LIN Television Corporation

.Corporate Family Rating: Affirmed B2

.Probability of Default Rating: Affirmed B2

1st lien sr secured term loan A due 2017 ($124.5 million outstanding): Affirmed Ba2, LGD2 -- 18%

1st lien sr secured term loan B ($258.1 million outstanding): Affirmed Ba2, LGD2 -- 18%

$200 million of 8.375% sr notes due 2018: Affirmed B3, LGD5 -- 75%

$290 million of 6.375% sr notes due 2021: Affirmed B3, LGD5 -- 75%

Speculative Grade Liquidity Rating: Affirmed SGL -- 2

Outlook Actions:

..Issuer: LIN Television Corporation

......Outlook is Stable

To be withdrawn upon closing of the transaction:

..Issuer: LIN Television Corporation

EXISTING 1st lien sr secured revolver due 2016, Ba2, LGD2 -- 18%: To be withdrawn

RATINGS RATIONALE

LIN's B2 Corporate Family Rating (CFR) reflects high leverage with a 2-year average debt-to-EBITDA ratio of 5.1x (including Moody's standard adjustments) estimated for December 31, 2012 reflecting improvement compared to 5.5x as of June 30, 2012 pro forma for the acquisition of New Vision Television. Strong demand for political advertising in the second half of 2012 resulted in an EBITDA boost and improved leverage to levels that were reported prior to the acquisition of New Vision Television. We expect LIN will utilize the majority of its free cash flow to reduce debt balances, leading to improved capacity to fund an acquisition or dissolution of the NBC JV within leverage parameters consistent with its B2 CFR. Moody's expects 2-year average leverage ratios to fall below 5.0x by the end of 2013, absent additional acquisitions. EBITDA should decline in the high single-digit percentage range in 2013, on a same store basis, due to the absence of significant political ad spending (more than $65 million in 2012), partially offset by low single-digit growth in core ad revenues and expected increases in retransmission fees. The company's leading market positions and good free cash flow generated by its geographically diverse portfolio of middle market television stations partially offset the negative impact of potential delays in achieving the portion of planned revenue synergies related to the New Vision acquisition and the overhang from LIN TV Corp.'s guarantee of the NBC JV debt. LIN has multiple network affiliates in 18 of its 23 markets leading to high revenue share and good margins. The proposed amendment reduces pricing on the term loan saving $1.9 million of cash interest in 2013. The amendment also provides a greater EBITDA cushion to financial maintenance covenants by relaxing the total leverage test to 7.0x from 6.0x, relaxing the senior leverage test to 3.75x from 3.0x, and eliminating leverage requirement step-downs. Moody's notes proposed terms provide management with greater flexibility to refinance at least a portion of the $815.5 million NBC JV note.

Ratings incorporate expectations that LIN will achieve the majority of its planned $25 million of revenue and expense synergies related to the New Vision acquisition by the end of 2014 and that retransmission revenues through the end of 2013 will increase for existing and newly acquired stations accompanied by higher expenses related to retransmission sharing fees (or reverse compensation) paid to the networks. Exposure to cyclical advertising revenue and the ongoing risk of audience diffusion resulting from media fragmentation weigh on debt ratings. Liquidity is good with minimum 2-year average free cash flow-to-debt ratios of 7% over the rating horizon and the absence of near term maturities. Ratings also reflect weaker than expected performance for the NBC JV with lower than initially anticipated retransmission revenues for 2013 and 2014, reduced ad revenue expectations primarily for the Dallas station, and the decision to fund construction of a new studio in Fort Worth. Although stronger EBITDA generation from LIN's stations in the second half of 2012 and lower debt balances offset weaker anticipated performance for the NBC JV in 2013, failure to keep the NBC JV on track with its revised operating plan would erode the asset coverage provided by the NBC JV stations putting additional downward pressure on LIN's debt ratings.

The NBC JV continues to be a significant overhang that poses elevated risk to LIN's credit profile given the recent increase in the expected shortfalls in meeting interest payments on its $815.5 million loan from General Electric Capital Corporation ("GECC") through 2014 and given the decline in its asset value since the JV was formed in 1998. As of December 2011, the NBC JV was valued at $118 million less than amount due under the note; although significant, this value gap reflects improvement compared to the estimated $254 million gap between asset value and the note amount at FYE2010 and $366 million at FYE2009. Moody's believes the NBC JV has a greater reliance on the financial capacity of LIN due to increased potential that the value of the NBC JV will be less than the amounts owed related to the $815.5 million note at maturity in addition to any unpaid shortfall loans (currently not guaranteed by LIN). In January 2011, Comcast acquired 51% of NBCUniversal, Inc. with GE owning the remaining 49%. Additionally, LIN TV Corp. and GE agreed to fund interest coverage shortfalls with loans based on LIN's ownership interests (LIN 20% / GE 80%). Ratings hinge on our expectation that LIN will utilize free cash flow to reduce debt and leverage to increase its capacity to finance an acquisition or other dissolution of the NBC JV, particularly if it occurs prior to the 2023 GECC loan maturity. Under most scenarios, an acquisition or dissolution of the NBC JV would be leveraging to LIN. The company's capacity to fund a transaction without exceeding leverage metrics expected in the B2 CFR (as would be the case if a transaction occurred in the near term) increases the longer it can forestall such an event. Moody's believes LIN could fund a transaction within the B2 rating by the end of 2014 or 2015 assuming free cash flow continues to be applied to reduce debt balances and assuming no additional downward revisions to the operating plan of the NBC JV.

The stable rating outlook reflects our expectation that LIN will track Moody's base case forecast with core revenues growing in the low single digit percentage range resulting in 2-year average debt-to-EBITDA ratios (includes political and non-political years) remaining below 5.75x over the rating horizon and good liquidity including continued capacity to fund an additional $6 million of estimated debt service shortfalls of the NBC JV through 2014. The outlook does not include significant increases in debt balances to fund additional acquisitions resulting in elevated debt-to-EBITDA ratios. Ratings could be downgraded if an advertising downturn, cash distributions to shareholders, additional debt financed acquisitions, or the dissolution of the NBC JV results in 2-year average debt-to-EBITDA ratios being sustained above 6.0x (including Moody's standard adjustments) over the next 12 to 18 months. Beyond 12 to 18 months, debt-to-EBITDA ratios would need to be reduced sufficiently below FYE2012 levels to maintain a B2 CFR and to position the company for a refinancing of debt maturing in 2017-2018 while providing financial flexibility to resolve NBC JV obligations. Deterioration in liquidity including diminished capacity to cover debt service shortfalls at the NBC JV (that increases near term risk of dissolution of the JV) or other cash requirements could also result in a downgrade. An upgrade is not likely until there is a clear path to resolution of the overhang related to the NBC JV.

RECENT EVENTS

On November 15, 2012, the company launched LIN Mobile to provide mobile marketing solutions for clients nationwide. Management continues to add to its digital platform having acquired Nami Media in 2011 and RIMM in 2009. On November 14, 2012, the company extended its $25 million stock repurchase program to November 2013 from November 2012. A total of roughly $15 million has been repurchased since November 2011 leaving $10 million available under the program.

The principal methodology used in rating was the Broadcast and Advertising Related Industry Methodology published in May 2012. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

LIN Television Corporation is headquartered in Providence, RI, and owns or operates 43 television stations plus 7 digital channels in 23 mid-sized U.S. markets ranked #22 to #188 reaching 10.6% of U.S. television households. In addition, LIN TV Corp., the company's parent, owns 20% of KXAS-TV in Dallas, TX and KNSD-TV in San Diego, CA, through a joint venture with NBCUniversal Media, LLC ("NBC JV"). HM Capital Partners LLC ("HMC") holds an approximate 42% economic interest in LIN and approximately 70% of voting control is held by HMC and Mr. Royal Carson III, a LIN director and advisor for HMC. The company is expected to generate approximately $550 million of net revenues for the fiscal year ended December 2012 (includes acquisition of New Vision from October 12, 2012)

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