Local TV stations may experience a slight dip in revenues from retransmission and advertising, according to S&P's predictions.
The television broadcasting industry is facing a potential crisis in the coming years, according to a recent report by S&P Global Ratings. The report highlights a number of factors that could lead to a shortfall in willing lenders for the sector, causing EBITDA to gradually decline and cash flow to weaken.
The ongoing trend is likely to make TV stations increasingly reliant on political advertising, but this may not be enough to offset the financial challenges. S&P Global Ratings predicts modest declines in retransmission consent and core advertising revenue for TV stations in upcoming years.
Two of the six local TV broadcasters rated by S&P Global Ratings have stable outlooks. Nexstar and Tegna, with their stronger leverage and cash flow profiles, are in a better position to weather the storm. However, the remaining four broadcasters - Sinclair, Gray, E.W. Scripps, and CMG - have negative outlooks, as they have elevated leverage and could potentially face refinancing risk.
If these four broadcasters do not use their excess cash balance and expected free operating cash flow (FOCF) toward debt repayment, they could face refinancing risk, according to the report. The concentration of debt maturities in the TV industry beginning in 2026 increases refinancing risk, as many local TV broadcasters face refinancing upcoming debt maturities at higher interest rates in 2026 and beyond.
The report notes that S&P Global Ratings has downgraded some debt from several broadcasters, including Cox Media Group, Gray Media, Sinclair, and E.W. Scripps. Local TV companies with debt covenants maturing after 2026 that face refinancing risk if they do not use excess cash and expected FOCF for debt repayment typically include smaller broadcasters and regional media firms.
Oberman, an analyst at S&P Global Ratings, does not currently foresee making additional material revisions to estimated company enterprise values, unless retransmission fees and core ad revenues decline at a faster-than-projected rate. However, the financial health of the industry remains uncertain, and it is crucial for broadcasters to manage their finances carefully to mitigate the risks.
In conclusion, the television broadcasting industry is facing a challenging period ahead, with refinancing risk looming large for many broadcasters. It is essential for broadcasters to prioritise debt repayment and manage their finances carefully to navigate these turbulent waters.
