Tribune Media May Review Assets, Make Acquisitions in Wake of Sinclair Deal Failure

Tribune Media (TRCO) could still explore a strategic review of some of its assets and start making acquisitions soon after killing its attempt to merge with Sinclair Broadcast Group (SBGI), S&P Global Ratings said on Wednesday.

The agency raised its outlook on the Chicago-based broadcast and digital content company to stable from negative, while affirming its BB- issuer credit rating on Tribune.

S&P said the company is expected to maintain strong liquidity and low leverage “despite the possibility that the company may become more acquisitive or return cash to shareholders,” said primary credit analyst Thomas Hartman.

The agency expects that debt to trailing eight-quarter average earnings before interest, taxes, depreciation and amortization will stay below 5x, he said, adding that leverage is currently in the low 4x area.

Tribune terminated the Sinclair bid and filed lawsuit against the company for breach of contract, on the heels of a decision by the Federal Communications Commission to refer their tie-up to an administrative law judge, effectively putting it on indefinite hold.

Tribune could resume share repurchases and acquisitions as soon as this year, Hartman said. The company also has a “healthy cash flow that could partly offset a more aggressive capital investment strategy in order to keep leverage below 5x,” he said.

The rating on Tribune could be raised if it makes a public commitment to a more conservative financial policy, although S&P said this was unlikely. The rating could be reduced if leverage rises and S&P believes it will stay above 5x on a sustained basis.