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Investing.com -- S&P Global Ratings has lowered the credit rating of The E.W. Scripps Co. from ’B-’ to ’CC’, due to the company’s announced debt restructuring plan. The rating agency views the restructuring as distressed, and the proposed exchange of term loan B3 as a default, as it expects lenders to receive less than originally promised without sufficient compensation.
The E.W. Scripps Co. has proposed to exchange its existing senior secured term loan B2 due in 2026 for a new senior secured term loan B2 due in 2028. It also plans to exchange its senior secured term loan B3 due in 2028 for a new senior secured term loan B3 due in 2029. The restructuring plan also includes a possibility of a conventional default without the transaction.
The company has entered into a transaction support agreement with lenders, comprising 62% of the aggregate principal amount of its existing term loan B2 lenders and 81% of its existing term loan B3 lenders. The transaction requires a minimum of 95% participation from the B3 lenders, which could potentially decrease to 90% based on certain terms and conditions. The transaction is expected to close in April 2025.
The E.W. Scripps Co. is offering to exchange its existing $543 million term loan B3 due in 2028 into a new senior secured term loan B3 due in 2029, less up to $200 million that could be rolled into a new term loan B2. The company is also proposing to exchange its existing $721 million term loan B2 due in 2026 into a new senior secured term loan B2 due in 2028.
The restructuring will also extend $208 million of the company’s $585 million revolving credit facility from 2026 to 2027. The spread on the revolving credit facility will increase to 550 basis points from 175-275 basis points, and the spread on the term loan B2 will increase to 575 basis points from 256 basis points.
The E.W. Scripps Co. ended 2024 with leverage of about 6.9x and faces limited ability to deleverage over the next few years due to pressures facing linear television. The company has been pursuing asset sales to aid in debt reduction, although the proceeds will not significantly reduce the company’s $2.6 billion debt burden.
S&P Global Ratings has expressed a negative outlook for the company. Upon completion of the transaction, the agency expects to further lower the issuer credit rating on the company to ’SD’ (selective default) and the issue-level rating on its senior secured term loan B3 to ’D’. However, the rating could be raised if the transaction is not consummated, likely to the ’ CCC (WA:CCCP)’ category. Under this scenario, the rating would reflect the potential for other restructuring initiatives and the company’s ability to refinance its upcoming debt maturities while maintaining healthy free operating cash flow.
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