Sinclair Warns It Might Go Bankrupt

July 14, 2009|By Lorraine Mirabella | Lorraine Mirabella,lorraine.mirabella@baltsun.com

Sinclair Broadcast Group Inc., faced with falling advertising revenue from automakers amid the recession, said it might consider filing for bankruptcy protection if the company cannot pay substantial debt coming due.

The Hunt Valley-based owner of television stations, which depends heavily on automotive advertisers for revenue, said it might be obligated to pay $488.5 million of its total outstanding debt within the next 18 months. The company said it had $1.3 billion in total debt outstanding as of March 31.

If note holders exercise options in May and January 2011, "We do not have the cash necessary to meet our [debt] repurchase obligations," the company said in a filing with the Securities and Exchange Commission. In the July 10 filing, the company also said it has been unable to sell its non-TV assets because of a lack of buyers with access to credit.

If it is unable to restructure debt or secure debt and equity financing through capital markets, the broadcaster said, it might consider selling assets or restructuring through a voluntary Chapter 11 bankruptcy filing.

Wells Fargo Securities cut estimates on Monday for Sinclair's net broadcast revenue to $531 million from $539 million for this year and to $558 million from $584 million for next year and said it expects significant pressure on the company's stock.

"Mentions of a potential equity raising and bankruptcy are clearly not in equity investors' favor, in our view," Wells Fargo said in a research report.

Sinclair, which owns or provides programming or sales to 58 television stations, said it has started discussions with some of its note holders. The company said it has scheduled a conference call for 3 p.m. Tuesday to discuss its plans.

The TV station owner had reported a net loss of $85.7 million, or $1.06 per share, in the first three months of this year, compared with profit of $15 million, or 17 cents per share, in the first quarter of 2008. Local advertising revenue fell 18.3 percent, while national advertising revenue slid 31.3 percent. The hardest-hit categories included automotive, services, movies and fast food.

Automobile advertising has historically represented about a quarter of the company's ad revenue. But that percentage fell to less than 14 percent in the first three months of this year, the company said.

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