TEXT-S&P: Lamar rating unaffected by REIT consideration

Aug 10 - Standard & Poor's Ratings Services said today that its 'BB-' rating
and stable outlook on Baton Rouge, La.-based outdoor advertising operator Lamar
Advertising Co. and its operating subsidiary, Lamar Media Corp.
(Lamar), are not immediately affected by the company's announcement that it's
considering converting into a real estate investment trust (REIT). Under a REIT
structure, the company would be required to distribute 90% of taxable income to
shareholders, which in our opinion could reduce financial flexibility. However,
as of Dec. 31, 2011, the company had roughly $342.5 million and $458 million of
Federal and state net operating loss carry forwards, respectively, to offset
future taxable income. As a result, we believe the difference between the
company's taxable income and free operating cash flow will continue to be
meaningful over the foreseeable future, providing sufficient excess cash flow to
repay debt and pursue investments and acquisitions.

To qualify as a REIT effective Jan. 1, 2014, the company's target date, Lamar
will be required to distribute to shareholders in a taxable distribution, its
previously undistributed earnings and profits (E&P), attributable to taxable
periods prior to Jan. 1, 2014. We are uncertain on the amount of this
potential future obligation. Ratings could suffer if this distribution
requires debt funding and results in increased leverage.

Debt to EBITDA (adjusted for operating leases and asset retirement
obligations) for the 12 months ended June 30, 2012, was still high at 5.5x--an
improvement from 6x a year ago. Based on the company's plans to repay all or a
portion of its 6.25% subordinated notes in 2012, we expect debt leverage to
fall to about 5x by year-end, and potentially to the mid-4x area in 2013,
assuming continued voluntary debt repayment and moderate EBITDA growth.