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Investing.com -- Moody’s Ratings has affirmed TEGNA (NYSE:TGNA) Inc.’s Ba3 corporate family rating (CFR), Ba2-PD probability of default rating (PDR), and Ba3 ratings for the senior unsecured notes held by TEGNA and backed senior unsecured notes of Belo Corp, a wholly owned subsidiary of TEGNA. The SGL-1 Speculative Grade Liquidity rating remains unchanged. Moody’s has revised the outlook from negative to stable on March 31, 2025.
The affirmation of the CFR is based on the expectation that TEGNA’s operating performance, debt protection measures, and liquidity will align with a Ba3 credit profile over the rating horizon. This expectation is supported by TEGNA’s position as the nation’s largest independent station group owner of "Big Four" (NBC, CBS, ABC and FOX) broadcast network affiliates in the top 25 markets, reaching around 39% of US television households. TEGNA is also the largest NBC affiliate group and third largest CBS affiliate group.
Moody’s revised outlook to stable is based on the expectation that TEGNA will work towards maintaining leverage in the 3x-3.5x area over the rating horizon. This comes after last year’s return of excess cash to shareholders via share repurchases and dividends. Despite pressures on the company’s core advertising and retransmission revenues, Moody’s expects TEGNA to manage repayment of the $550 million 4.75% senior unsecured notes due in March 2026 effectively. As of the end of 2024, TEGNA’s financial leverage was 3.2x, the lowest among its rated TV broadcast peers, with cash balances of around $693 million and free cash flow (FCF) to debt at 15.7%.
TEGNA’s Ba3 CFR reflects its national reach, operational strength, moderate financial leverage, and credit protections measures suitable for the ratings. The company benefits from its material scale in local broadcast, diverse affiliate mix, high-quality stations, and top rankings in the designated market areas (DMAs) where it operates.
The Ba3 CFR is limited by TEGNA’s exposure to cyclical advertising revenue and the ongoing structural decline in linear TV core advertising. Additionally, TEGNA’s retransmission revenue growth may face challenges over the medium-to-long term due to the expected rate of traditional subscriber losses outpacing annual escalators in non-contract renewal years.
Over the next 12-18 months, Moody’s expects TEGNA to maintain very good liquidity, supported by solid excess cash generation, robust cash balances, and access to a sizable revolver. In 2025, TEGNA is expected to generate FCF of around $200 million to $250 million. At the end of 2024, cash balances were $693 million following strong FCF in an election year ($559 million), and $738.2 million was available under the $750 million revolving credit facility (RCF) due 2029.
Ratings could be upgraded if TEGNA were to maintain a publicly-defined financial policy with respect to financial leverage that is sustained comfortably below 3x and FCF to debt above 10%. Conversely, ratings could be downgraded if leverage is sustained above 4x as a result of weak operating performance, more aggressive financial policies, or inability to reduce debt levels. A downgrade could also arise if FCF to debt was sustained below 5% or TEGNA experienced deterioration in liquidity or covenant compliance weakness.
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