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Investing.com -- On Tuesday, March 18, 2025, Fitch Ratings announced that it has downgraded the Long-Term Issuer Default Rating (IDR) of The E.W. Scripps Company (Scripps) to ’CCC-’ from ’ CCC (WA:CCCP)’. The downgrade also includes Scripps’ senior secured debt, which has been downgraded to ’CCC+’ with a Recovery Rating of ’RR2’ from ’B-’/’RR2’, and its senior unsecured debt to ’C’/’RR6’ from ’CC’/’RR6’. The ratings agency has also placed Scripps’ IDR and senior secured debt on Rating Watch Negative (RWN).
The downgrade and RWN are a result of Scripps’ recent agreement with certain existing lenders of its Term Loan B-2 and Term Loan B-3 tranches to extend maturities to avoid default, potentially leading to a distressed debt exchange (DDE). If Fitch deems an exchange offer as a DDE, it would lead to a further downgrade of the ratings and the removal of the RWN.
The proposed DDE transaction, which Scripps aims to close by April 2025, only buys additional time and does little to address the broader credit risk of excessive debt. Fitch expects the company to enter into additional potential near-term DDE transactions as it likely negotiates with its 2027 unsecured holders for a favorable solution to also extend maturities.
Fitch believes Scripps’ two-year average leverage will rise over the next two years, increasing the pressure on the company to negotiate favorable terms with multiple tranches of existing bondholders and the same group of existing lenders that have agreed to extend maturities to 2028/2029. Fitch does not expect Scripps’ core business to grow rapidly enough during this timeframe to meet the upcoming maturity obligations.
The national advertising market has slowed over the past four years due to high interest rates post-pandemic, limiting budgets and increasing competition from digital media. This has undermined Scripps’ national advertising performance compared to peers with a more balanced national and local media presence.
Fitch also believes the consistent growth of the high-margin retransmission business might be peaking due to rising cable network costs and continuing erosion of the subscriber base, as subscribers opt for alternative video content distributors. This trend will increase Scripps’ dependence on core advertising, reflecting a more volatile operating profile.
Scripps’ ’CCC-’ rating reflects the company’s limited liquidity, accelerating secular challenges, declining profitability, and sustained elevated leverage. The company faces $1.3 billion in secured and unsecured debt maturities over the next 18-24 months, increasing refinancing risk during a non-political year.
Scripps is the fourth-largest TV Broadcaster in the U.S., with smaller scale and lower margins relative to other peers in the sector like Gray Media, Inc. (B-/Negative).
Fitch’s recovery analysis assumes that Scripps would be considered a going-concern in bankruptcy and that the company would be reorganized rather than liquidated. The recovery analysis also assumes a 10% administrative claim and a 5.5x distressed enterprise value multiple, reflecting the value of the company’s Federal Communications Commission licenses in small and medium-sized U.S. markets.
According to Fitch’s rating sensitivities, the IDR will be downgraded once the DDE is agreed upon with investors and a date for the exchange is set. The IDR will remain at this level until the DDE is executed, at which point the IDR will be lowered to ’RD’. If Fitch rates the new capital structure and instruments, it will immediately assign new ratings upon DDE completion in accordance with Fitch criteria.
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