Street Calls of the Week
Investing.com -- On Tuesday, Fitch Ratings announced it has downgraded the Long-Term Issuer Default Ratings (IDR) of The E.W. Scripps Company to ’RD’ from ’CCC-’. The ratings agency also downgraded the issue-level ratings of the company’s old senior secured term loan Bs to ’C’ from ’CCC+’, subsequently withdrawing them.
However, following the closure of Scripps’ transaction support agreement (TSA) on April 10, 2025, Fitch upgraded the company’s IDR to ’CCC-’. This upgrade reflects an improved debt maturity profile and an increase in the two-year average EBITDA leverage, which Fitch expects to rise further in a non-political year.
Fitch also assigned ratings of ’CCC+’/’RR1’ to the new senior secured term loan Bs and revolving credit facilities, while affirming the senior secured notes at ’CCC+’ and the senior unsecured notes at ’C’/’RR6’. The ratings of the secured facilities subject to the DDE have been removed from Rating Watch Negative.
As part of its TSA debt restructuring transactions, Scripps terminated the ratings of the $585 million revolving credit facility and the term loans due in 2026 and 2028. Fitch no longer considers these facilities relevant to their coverage.
The TSA refinancing transactions have deferred refinancing risk until 2027 when the unsecured notes are due. Despite this temporary reprieve, Fitch anticipates more near-term distressed debt exchange (DDE) transactions as the company negotiates with holders of the 2027 unsecured notes to extend maturities.
Fitch believes that Scripps’ two-year average leverage will continue to increase over the next two years, adding pressure on the company to come to favorable terms with multiple tranches of existing bondholders and lenders. This is due to the slow growth of Scripps’ core fundamental business, which may not meet their upcoming maturity obligations.
The national advertising market has been impacted by high interest rates post-pandemic, increasing competition from digital media. This has affected Scripps’ performance, as key sectors such as automotive, travel, retail, and financial services have not fully returned to pre-pandemic levels.
Fitch also expressed concerns about the growth of the high-margin retransmission business, which might be peaking due to rising cable network costs and the continuing erosion of the subscriber base. This trend is expected to increase Scripps’ dependence on core advertising.
Scripps’ ’CCC-’ rating reflects the company’s limited liquidity, accelerating secular challenges, declining profitability, and sustained elevated leverage. The company’s profitability and financial flexibility have been challenged by weaker-than-expected national advertising spending and increasingly higher TV cable churn rates.
Fitch also conducted a recovery analysis, assuming that Scripps would be considered a going concern in bankruptcy and that the company would be reorganized rather than liquidated. This resulted in a going-concern EBITDA of $400 million and a distressed enterprise value multiple of 5.5x.
The agency estimates an adjusted, distressed enterprise valuation of roughly $2.2 billion, resulting in a ’B-’/’RR1’ senior secured Recovery Rating, and a ’C’/’RR6’ unsecured debt Recovery Rating.
Fitch noted that another distressed debt exchange transaction or the commencement of a bankruptcy process could lead to a negative rating action or downgrade. On the other hand, successful refinancing of upcoming debt maturities and operational improvements could lead to a positive rating action or upgrade.
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