Emmis Operating Company -- Moody's Says Amendment to Relax Leverage Covenant Has No Immediate Impact on Emmis' Debt Ratings

New York, November 10, 2014 -- Moody's Investors Services ("Moody's") said that on November 7, 2014, Emmis Operating Company ("Emmis") obtained an amendment to its credit agreement to relax its leverage covenants through February 2016. Although revenue generation for the six months ended August 2014 outperformed in most of its markets, including Los Angeles, overall revenue and EBITDA lags behind the company's initial forecasts due largely to soft ad demand in the New York market which accounts for roughly 23% of radio segment revenue and 39% of segment broadcast cash flow. Management indicates revenue performance for Emmis' stations are better than for most of its markets with an overall revenue decline through the first six months ended August 2014 of less than (1%) compared to market declines of (5.3%). As a result of weak ad demand in New York, the EBITDA cushion to its original leverage covenants was diminished. Despite the weakness in New York, the company's performance and credit metrics remain within the B2 rating and there is no immediate impact to debt ratings or the stable outlook. We expect debt-to-EBITDA to remain below 5.60x or better over the next 12 months (including Moody's standard adjustments) and free cash flow-to-debt ratios to be in the mid single digit percentage range both of which are better than our downgrade triggers of 5.75x debt-to-EBITDA (including Moody's standard adjustments) and single digit percentage free cash flow-to-debt. We will monitor the company's performance closely as there would be downward pressure on debt ratings to the extent the company experiences continued weakness in one or more of its key markets, especially if weak ad demand leads to higher leverage or erosion of free cash flow.

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