Nexstar Media Group Inc.

The stable outlook reflects our expectation that Nexstar will manage leverage to between 4.5x-5.5x by directing increasing cash flow towards a balance of acquisitions, shareholder returns, and debt repayment. We could lower the rating if Nexstar's leverage increases above 5.5x on a sustained basis, potentially due to debt-funded acquisitions, shareholder returns, or an economic downturn that causes advertisers to pull back on television advertising. We view an upgrade as unlikely over the next 12 months given our expectation for higher leverage to support acquisitions. Still, we could raise the rating if we believe Nexstar will maintain leverage below 4.5x, including the potential for debt-funded acquisitions. Nexstar signed a definitive agreement to acquire Tribune in Dec. 2018 for $6.4 billion (including

...Scale provides the company with bargaining power. Nexstar Media Group Inc. operates television stations in nearly half of the markets in the U.S., allowing it to reach 39% of television households. S&P Global Ratings believes Nexstar's reach strengthens its position when negotiating agreements with multichannel video programming distributors (MVPDs, including cable, satellite, and telecom providers) that retransmit their content, negotiating reverse retransmission agreements with broadcast television networks for programming, and competing for national advertising. Growing percentage of retransmission revenue provides an increasing degree of cash flow stability.We expect retransmission revenue (currently around 40% of revenue) will grow in the low-double-digit percent area over the next few years because of contractual annual price escalators and higher rates associated with contract renewals. This reduces Nexstar's exposure to more volatile advertising revenue, which has short-term contracts...

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