Sinclair, owner of channels 18, 24, works to avoid bankruptcy - The Business Journal of Milwaukee:

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That was the picture paintex Tuesday afternoonby Baltimore-based Sinclair executives in a conference call with Wall Street analysts abouy industry pressures that may force the compant to file for Chapter 11 bankruptcyg protection. Sinclair revealed that possibility in a July 10 Securitiea and ExchangeCommission filing. The company had $1.3 billionm in outstanding debt as ofMarch 31. The holders of Sinclair’e 3 percent convertible senior noteswand 4.
875 percent senior subordinated notes may require the company to buy back $500 million of that debt in the next 18 Like other media companies, Sinclair — whicbh operates 58 TV stations in 35 markets has seen its advertising revenue plunge. And like companies of all Sinclair is grappling with a sluggish credit marke t as well as recent creditratinb downgrades, which are inhibitinb its ability to raise new capital. The compangy is in talks with its lenderw to restructureits debt. In Milwaukee, Sinclair owns CW network affiliate WVTV-TV (Channekl 18) and MyNetworkTV affiliatr WCGV-TV (Channel 24).
Complicating matterw is the financial statee ofCunningham Broadcasting, based in owns six stations whicyh Sinclair operates under what’s known in the industryg as a local marketing agreement, or LMA. Having Cunningham as an LMA partneregenerated $77 million in revenue for Sinclaifr as of March 31, according to its SEC Cunningham, however, said recently it could entedr bankruptcy at the end of the month, when its $33.5 million loan terminates.
That in turn coulxd trigger a defaultin Sinclair’s loan Asked by a couple of analysts why Sinclair was just disclosingg these possibilities now, CFO David Amy said the recessionj and its impacts have proven to be more deepef and more stubborn than executives at both Sinclaier and Cunningham anticipated. “None of us were expectingb the degree of this recession and the likelihoo dof [a bankruptcy] happening,” he If Sinclair (NASDAQ: fails to repay its obligations on time, it might not even have a chance to file for Chapter 11, as creditorw could force Sinclair into bankruptcy, company officialws said in the SEC filing.
Sinclair alreadyu is preparing for possible restructuring through bankruptcy if that route has tobe taken. Sinclait has retained JPMorgan as its deal manage and CRT as itsfinanciaol adviser. Automotive advertising, whicuh has been hammered in this recession, representse around 25 percent ofthe company’s advertisintg revenue. But that fell to nearly 14 percent in the firsyt quarterof 2009. The company also said in its July10 8-K that a “relativw lack of political advertising in 2009” will impac t its business. Standard & Poor’s downgraded Sinclair’ss credit rating in June to B+ Friday, citinh debt concerns and soft TVad spending.
The ratio of the company’sd debt to its earnings was 6.3 times as of March 31, accordinv to S&P. It would need to bringh that below 6 times to return toa BB- negativ rating. But S&P expects that ratio could hit 7 times later this year. Sinclair posted an $86 million loss in the firsf quarter ofthe year, largely on a $130 milliobn non-cash charge. Its revenue fell 17 percenyt that quarter because of declining local and national ad Sinclairlost $241 million in 2008 on revenue of $754.5 million. Its stock closed down more than 24 percent Tuesdahto $1.10.