E.W. Scripps upgraded to ’CCC+’ by S&P Global Ratings, outlook remains negative

Investing.com -- S&P Global Ratings has upgraded its issuer credit rating for The E.W. Scripps Co. to ’CCC+’ from ’SD’ (selective default). This move comes after the company completed the exchange of its term loan B-2 and term loan B-3, but still has $426 million of senior unsecured notes due in 2027 that it will need to refinance. The company’s ability to significantly reduce debt in advance is limited, making it dependent on favorable business, economic, and financial conditions to meet its financial obligations.

S&P Global Ratings also assigned ’B’ issue-level ratings and ’1’ recovery ratings to Scripps’ new $70 million revolving credit facility due in 2026, $208 million revolver due in 2027, $545.2 million senior secured term loan B-2 maturing in 2028, and $340.2 million secured term loan B-3 maturing in 2029. The issue-level rating on the company’s $523 million senior secured notes due in 2029 was raised to ’B’ from ’ CCC (WA:CCCP)’, with the recovery rating remaining at ’1’. The issue-level ratings on the company’s $426 million senior unsecured notes due in 2027 and $392 million senior unsecured notes due in 2031 were raised to ’CCC’ from ’C’, with recovery ratings revised to ’5’ from ’6’.

Despite these changes, the company’s capital structure remains unsustainable. The recent transaction addressed its 2026 term loan maturity, but Scripps still has $426 million of senior unsecured notes due in 2027, with annual maturities thereafter through 2029 and an additional maturity in 2031. As part of the refinancing, the company drew on its revolving credit facilities. It has a balance of $70 million due in January 2026 and $107 million due in July 2027.

Scripps faces challenges in significantly reducing its debt ahead of its upcoming debt maturities due to pressures facing linear television and its exposure to national advertising in its networks business. The company’s adjusted gross leverage is expected to be 6.5x at the end of 2025, down from 6.9x at the end of 2024, thanks to cost restructurings and strong political revenue of $343 million. However, leverage is expected to rise above 7x in 2026, due to a drop in political revenue, declines in core and national advertising revenue, and a decrease in distribution revenue.

Scripps’ preferred stock balance, which is included in the calculation of adjusted debt, is expected to continue to rise due to the accruing of paid-in-kind dividends, further limiting its ability to reduce debt. The company has been pursuing asset sales to aid in debt reduction, although the proceeds are unlikely to significantly reduce its overall $2.8 billion debt burden.

The company’s 2027 senior unsecured notes are trading at about 80 cents on the dollar, increasing the potential for a subpar debt buyback. If Scripps were to buy back or exchange its debt below par, it could be viewed as distressed and tantamount to a default.

The negative outlook reflects ongoing pressures facing Scripps and the potential for a lower rating if a default is envisioned within 12 months. However, S&P Global Ratings expects Scripps will have sufficient liquidity to meet its operating and fixed-charge obligations over the next 12 months.

The ratings could be lowered if Scripps pursues below-par debt repurchases, debt exchanges, or an out-of-court restructuring that is deemed tantamount to a default, or if there is a realistic possibility of a conventional default occurring in the next 12 months. On the other hand, ratings could be raised if Scripps addresses its 2027 and 2028 debt maturities at affordable interest rates, generates sustainable free operating cash flow, and keeps EBITDA interest coverage comfortably above 1.5x.

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