TEXT-S&P cuts LBI Media rating to selective default

Thu Jan 3, 2013 4:57pm EST

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Overview
     -- U.S. radio and TV broadcaster LBI Media Inc. (LBI), its parent LBI 
Media Holdings Inc. (Holdings), and some lenders agreed to exchange about 
$174.6 million in senior subordinated notes due 2017 for new 11.5%/13.5% 
payment-in-kind (PIK) second-priority secured subordinated toggle notes due 
2020 and warrants, and $30.9 million of Holdings' senior discount notes due 
2013 (unrated) with new 11.5%/13.5% PIK second-priority secured subordinated 
toggle notes due 2020 and new Holdings' 11% senior notes due 2017.
     -- We are lowering the corporate credit rating on LBI to 'SD' from 'CC' 
and lowering the issue-level rating on the 8.5% senior subordinated notes due 
2017 to 'D'.
     -- We expect to reassess our corporate credit rating on LBI over the next 
few weeks. We expect that it will likely be in the 'CCC' category.
    
Rating Action
On Jan. 3, 2013, Standard & Poor's Ratings Services lowered its corporate 
credit rating on Burbank, Calif.-based LBI Media Inc. (LBI) to 'SD' from 'CC'. 

The issue-level rating on the company's 8.5% senior subordinated notes due 
2017 was lowered to 'D' from 'CC', and the recovery rating on this debt 
remains unchanged at '6' (0% to 10% recovery expectation). 

The issue-level rating on the company's 9.25% senior secured notes due 2019 
remains 'CCC'. The recovery rating on this debt remains unchanged at '3' (50% 
to 70% recovery expectation).
Rationale
The rating actions follow the company's announcement that it completed the 
exchange transaction on Dec. 31, 2012. Under our criteria, we consider debt 
exchanges of highly leveraged issuers as tantamount to a default. 

Although the exchange transaction was not a significant deleveraging event, 
the post-exchange capital structure provides the company the flexibility to 
reduce cash flow deficits by paying interest in kind on its new exchanged 
debt, and by reducing October 2013 debt maturities to about $11 million from 
$41.8 million. However, we estimate that cash flow deficits will persist.

We will reassess the corporate credit rating on further review of the exchange 
documents and business trends. It is our preliminary expectation that we would 
not raise the corporate credit rating higher than the 'CCC' category based on 
the company's still excessively high debt leverage, our expectation of 
negative discretionary cash flow, fractional EBITDA coverage of interest 
expense, and our expectation of continuing losses at the Estrella network. 

Related Criteria And Research
     -- Rating Implications Of Exchange Offers And Similar Restructurings, 
Update, May 12, 2009

Ratings List
Downgraded
                                       To                 From
LBI Media Inc.
 Corporate Credit Rating               SD/--              CC/Negative/--

Downgraded; Recovery Rating Remains Unchanged
LBI Media Inc.
 Subordinated                          D                  CC
  Recovery Rating                      6                  6

Ratings Affirmed; Recovery Rating Remains Unchanged

LBI Media Inc.
 Senior Secured                        CCC
  Recovery Rating                      3


Complete ratings information is available to subscribers of RatingsDirect on 
the Global Credit Portal at www.globalcreditportal.com. All ratings affected 
by this rating action can be found on Standard & Poor's public Web site at 
www.standardandpoors.com. Use the Ratings search box located in the left 
column.
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