Nexstar Media Group Inc.

The stable outlook reflects our expectation that Nexstar will manage leverage between 4.5x and 5.5x by directing increasing cash flow toward a balance of shareholder returns, acquisitions, and debt repayment. We could lower the rating if a more severe advertising recession were to reduce the company's advertising revenue beyond our base case forecast with the result that leverage increased above 5.5x in 2020 without a clear path to improvement back below this level in 2021. We view an upgrade as unlikely over the next year because we expect declines in advertising revenue will prevent leverage from improving below 4.5x. Longer term, we believe shareholder-friendly activities are likely to prevent leverage from declining to and remaining below 4.5x. Nexstar has shown

...We believe the spread of the coronavirus has pushed the U.S. economy into a recession, which will hurt television advertising in 2020. Nexstar generates revenue by selling airtime primarily to local advertisers (see chart 1). Core advertising (excluding political) revenue is highly correlated to GDP growth because expectations for consumer spending drive advertising budgets. While local television broadcasters have not yet seen an impact from economic weakness in the U.S. stemming from the global coronavirus pandemic, we expect there will be a reduction in spending on local television advertising in the second and third quarters of 2020 with improvement in the fourth, resulting in a total industrywide decline of 13.5% for the year....

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