Lamar Media Corp. Upgraded To #BB# From #BB-#; New Debt Assigned #BBB-# Outlook Stable

Stocks and Financial Services Press Releases Tuesday February 13, 2018 09:10
CHICAGO--13 Feb--S&P Global Ratings
CHICAGO (S&P Global Ratings) Feb. 12, 2018--S&P Global Ratings today raised its corporate credit rating on Baton Rouge, LA-based Lamar Media Corp. to 'BB' from 'BB-'. The rating outlook is stable.

At the same time, we assigned our 'BBB-' issue-level rating and '1' recovery rating to the company's proposed $400 million term loan B. The '1' recovery rating indicates our expectation for very high recovery of principal (70%-90%; rounded estimate: 95%) in the event of a payment default.

We are also raising our issue-level ratings on the company's existing senior unsecured notes to 'BB' from 'BB-'. The recovery rating remains a '3'.

In addition, we are affirming our 'BB-' issue-level rating on the company's existing senior subordinated notes and revising our recovery rating to '5' from '3'. The '5' recovery rating indicates our expectation for modest recovery of principal (10%-30%; rounded estimate: 20%) in the event of a payment default.

The upgrade reflects Lamar's record of maintaining leverage in the low-4x area and our view that the company has more financial flexibility than its more highly levered REIT peers by operating at this leverage level. We expect leverage will remain in the low-4x area in 2018 as Lamar uses its revolving credit facility to fund tuck-in acquisitions. We also expect Lamar will continue to pay out at least 90% of its taxable income in the form of dividends because of its REIT status. In addition, with the company's large revolving credit facility and additional availability after debt repayment from the proposed transaction, we believe Lamar has strengthened its liquidity position.

The stable outlook reflects our expectation that the company will continue to generate modest organic revenue and EBITDA growth over the next 12 months while maintaining lease-adjusted leverage in the low-4x area.

We could lower the rating if the company's operating performance deteriorates because of economic pressure, and we believe its lease-adjusted leverage would rise and remain above 4.5x on a sustained basis. A downgrade would more likely occur if a permanent shift in Lamar's financial policy causes its leverage to rise above 4.5x and we believe the company's REIT status limits its financial flexibility.

Although unlikely over the next 12 months, we could raise our corporate credit rating on Lamar if the company adopts a more conservative financial policy, despite its REIT status, while maintaining fully adjusted leverage in the low-3x area. An upgrade would also require continued revenue growth in the static and digital billboard segments due to improved advertising yields, which we view as sustainable over the next two to three years.


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